Effective interest method for leases
[DOC File]1 - Cengage
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The straight-line method allocates a fixed portion of a bond discount or premium each interest period to adjust the interest payment to interest expense. The effective interest method, which is used when the effects of amortization are material, applies a constant rate of interest to the carrying value of the bonds.
[DOC File]godgiften.weebly.com
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The effective-interest method is used to allocate each lease payment between interest expense and a reduction of the lease liability. If the lease transfers ownership or contains a bargain purchase option, the asset is amortized in a manner consistent with the lessee's normal depreciation policy on assets owned, over the economic life of the ...
[DOC File]1. The principal advantages to a lessee in leasing rather ...
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The lease obligation is being amortized using the effective-interest method with interest being paid for only 4 years, while the asset is being amortized using the sum-of-the-years’-digits method over a 5-year life. Problem 15–59. As of December 31, 2005, Jaquar Mining and Manufacturing Company had the following obligations under leases:
[DOC File]CHAPTER 21
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The effective-interest method is used to allocate each lease payment between a reduction of the lease obligation and interest expense. If the lease transfers ownership or contains a bargain purchase option, the asset is depreciated in a manner consistent with the lessee’s normal depreciation policy on assets owned, using the economic life of the asset and allowing for salvage value.
[DOC File]Leases (GRAP 13) - MyActive
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The finance income received by the municipality is allocated on a systematic basis over the lease term, similar to the implicit interest rate method discussed in paragraph 3.2. As with finance leases in the financial statements of the lessee, the sum-of-the-digits method may be used to distinguish between capital repayments and finance revenue.
[DOC File]Professor Paul Zarowin - NYU Stern School of Business
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(4) The lessee=s interest expense equals the interest rate x the net BV of the lease. The net BV declines over time because each payment repays some principal. In this way, a capital lease is the same as a mortgage. This is an example of the effective interest method.
[DOC File]CHAPTER 1
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The effective interest method is more difficult to apply than the straight-line method, but it must be used when the results of the two methods differ significantly. To apply the effective interest method to the amortization of a discount, it is first necessary to determine the market interest rate for similar securities on the issue date.
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