Free Cheat Sheet Included! Master Lease Accounting for the CPA Exam | Maxwell CPA Review

Thank you so much, this was so easy to understand and follow!

In operating lease calculation. the 3 year ROU plug ins does not equal $124500 to totally wipe out the ROU account. Can you explain why the difference?

I think, the ROU amortization amount for finance lease is not correct, it should be 41500.

Hi Kyle, how do you record lease agreement for office space under the new requirement ASC 842 if you do not have interest rate, implicit rate-- just the term of the lease 3yrs, and monthly payment (8,000) with 10% increase if the lessee want to renew the lease.

How to determine in this case implicit rate if I only have this information for the lease agreement???

Is Sales tax on the lease payment a current expense, or is it supposed to be capitalized?

ROU asset should get credited during Y2,3 and 4 with the plug amount, right.. why are you showing debited

Can cash paid be different than lease expense?

You need to redo the Operating Lease slides. The "plug" entry for the Right of Use Asset should be a CREDIT. It needs to REDUCE the debit balance for ROA on the balance sheet.

Would appreciate if you can provide lessor accounting impact as well and the other aspects like lease termination/ payoffs.

Why is Becker not this simple?

Thank you very much for making it so easy to understand!

Thank you for share

this video really helped me, thanks a lot! I really appreciate your content, keep it up!

Thank you!

I see a carrying value of $209.50 on end of 4th year. Carrying value at end of 3rd Year $45,645+$4,564-$50,000=$209.50. Why is that?

Thanks for the vid! The process and/or nomenclature of accounting for the operating lease is a bit obtuse. Namely that we're crediting the lease liability an amount equivalent to the effective interest ($124,500 * 10%) and then debiting the least liability $50,000. I don't understand why. We can get the same result and account balances with a less ambiguous approach.

Credit: Cash $50,000 | Debit: Interest Expense $12,450, Debit: Lease liability $37,550

Debit: Amortization of ROU $37,550 | Credit: ROU Asset $37,550

The Lease liability and ROU Asset carrying values work out to be the same , and the Interest Expense + Amortization of ROU expense is equivalent to lease expense on the earnings sheet.

You need to take this down until you can get your debits and credits in the correct column. Too confusing for those seeking guidance.

Does the decrease in ROU ALWAYS equal to the decrease in Lease liability every year? In what situation would they be different?

Why the Right to use asset is amortized by the lessee over the life of assets instead of lease term. The lessee won't have any lease liability or right to use after 3 years.. right? pls explain?

Great video, so essentially, the answer is 45,645. As year 1 starts on day 1 of the lease term.

Hi, thank you for this thorough lecture. Why was the Lease Liability credited against the Interest Expense? Isn't the Interest Expense supposed to be paid in Cash to the Lessor?

Hi. Can you please throw some light on where is deferred rent reflected under ASC 842?

can you explain “payments on capital lease” in cash flow statement

How do we account for Vat on finace lease ?

operating lease, your numbers of both ROU asset and Liabilities won't be zero at the end of year 4. There is $210 left. what is the reason?

Thank you so much for this wonderful topic.

Why don’t you take the first lease payment at lease commencement? Shouldn’t the year 2 journal entry be an interest expense of 10% * (124,500-50,000) = 74,500? Where 50,000 was the amount paid at lease commencement. Interest is not taken at year 1 since interest expense only occur with the passage of time, but I’m pretty sure the first lease payment is made at lease commencement and so the lease liability will reduce by the full $50,000

On the second operating example you are incorrect on the entries.. Not a great way to explain how to do the problem.

Great video! However the 2nd JE on the operating lease had me so confused for a few minutes! Haha the devil's in the details in our field isn't it? Love your content though, this definitely gave a simple and concise explanation of ASC 842.

When recording the Operating Lease, the Right of Use entry should be a credit instead of a debit. Thank you for this clear and concise explanation of how to record the different leases.

In operating lease 2nd journal entries, right to use account has to be credited so eventually at the end of lease it becomes zero, however in the video it is being debited

thanks for making easy to understand

Thankyou so much

Great video. Question for you if you don't mind: What if there is a pre payment at commencement, for let's say 3 months? When would you start amortizing the lease liability? Would it be in month 4?

Great video, it was very easy to follow!

Hi Kyle, good video, however, your entries for operating lease do not balance, asset reduction is on incorrect side, Dr.

Great video ,thanks