Leases - Chapter 15 Review

These flashcards cover key concepts related to leasing as discussed in Chapter 15 of the lecture notes.

Lessor

The owner of the asset in a leasing agreement.

Lessee

The user or operator of the leased asset.

Operating Lease

A lease where the lessor retains ownership rights and the lessee uses the asset temporarily.

Finance Lease

A lease that transfers substantial risks and rewards of ownership to the lessee and may include an option to purchase.

Lease Payment

The periodic cash payments made by the lessee to the lessor for the use of the asset.

Present Value

The current value of future cash flows discounted at the appropriate interest rate.

Residual Value

The estimated amount that the lessor expects to receive at the end of the lease term.

Amortization

The process of gradually writing off the initial cost of an asset over a period.

Lease Classification Criteria

The conditions that determine whether a lease is classified as a finance lease or operating lease.

Straight-Line Method

An accounting method where an asset's cost is expensed evenly over its economic life.