CPAnet Forum: sales-type lease

Active Topics

Memberlist

Help

FAR STUDY GROUP
CPAnet Forum : FAR STUDY GROUP

Topic: sales-type lease (

Topic Closed)

Author

Message

<< Prev Topic | Next Topic >>

FC.CPA
Contributor

Joined: 24 Jun 2009
Location: Canada
Online Status: Offline
Posts: 55

Posted: 23 Jul 2010 at 03:08 \| IP Logged

It's mind boggling.

DR: Lease receivable 300
DR: Interest receivable 108
CR: Sales revenue ; 408,968.76???

Sales revenue is only 300,000 though.

__________________
IL Board

BEC - 79
AUD - 79
FAR - 89
REG - 82
Ethics - Passed!
Certified - Nov 2010
Licensed - Feb 2011

CPASTONE
Contributor

Joined: 12 Jul 2010
Online Status: Offline
Posts: 95

Posted: 23 Jul 2010 at 03:25 \| IP Logged

Where is unearned interest account getting debited? or like you said " Interest Receivable getting debited. Unearned intt account will continue to have balance, since here it is not credited, while we are crediting Earned Interest Revenue.

__________________
CPASTONE
FAR- 7/30/10 -pass
Audit-05/26/10 -pass
Reg-05/21/10- pass
Bec-08/31/10-pass

CPASTONE
Contributor

Joined: 12 Jul 2010
Online Status: Offline
Posts: 95

Posted: 23 Jul 2010 at 03:27 \| IP Logged

Well I am kind of getting it.

I guess it should be

Dr.Cash
Cr.Lease payment receivable
Cr.Unearned Interest.

Looks ok to me. Here Unearned intt will go down.

__________________
CPASTONE
FAR- 7/30/10 -pass
Audit-05/26/10 -pass
Reg-05/21/10- pass
Bec-08/31/10-pass

FC.CPA
Contributor

Joined: 24 Jun 2009
Location: Canada
Online Status: Offline
Posts: 55

Posted: 23 Jul 2010 at 03:49 \| IP Logged

If you credit Unearned interest again, wouldn't that
increase the balance?

If the initial entries were;

DR: Lease payment receivable 300,000 (netting 408 and
108)
CR: Sales 300,000

then i can make sense of it. so when we receive the
payment it'll be;

DR: Cash 51,121
CR: Lease payment receivable 26,233
CR: Interest revenue 24,887

but the other way doesn't make any sense to me.

__________________
IL Board

BEC - 79
AUD - 79
FAR - 89
REG - 82
Ethics - Passed!
Certified - Nov 2010
Licensed - Feb 2011

1tryCPA
Major Contributor

Joined: 27 Jun 2010
Online Status: Offline
Posts: 337

Posted: 23 Jul 2010 at 07:49 \| IP Logged

I think that entries would be:

Cash 51,121.08

Lease Receivable 51,121.08

Interest revenue 24,887.89

Unearned interest revenue 24,887.89

calculated using effective interest method based on the carrying amount.

those entries reflect the fact that we already documented unearned interest revenue in the first entry, and it was correct. If we divide payment in interest and principal, we will never get rid of Unearned interest revenue by the end of the lease.

The first entry reduces our Lease Receivable account, the second re-class unearned revenue to revenue as it earned according to effective interest method.

Sales revenue should be 300,000 as in the first post

Lease R is not netted against unearned interest revenue: we should show it seperately.

Hope it helps

__________________
FAR - 07/09/10 - {95}
AUD - 10/02/10 - {96}
BEC - 11/29/10 - {92}
REG - 05/23/11 - {75 would be enough}90 unbelievable, and I AM DONE!!!
______________
Wiley book/Gleim CD/Gleim simulations

<< Prev Page of 3 Next >>

Printable version

You cannot post new topics in this forum
You cannot reply to topics in this forum
You cannot delete your posts in this forum
You cannot edit your posts in this forum
You cannot create polls in this forum
You cannot vote in polls in this forum