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ctcLink Accounting Manual | 40.60.30 Right-To-Use Lease Asset (Lessor)

40.60.30 Right-To-Use Lease Asset (Lessor)

At the lease inception, the lease receivable should be recorded at the present value of payments expected to be received during the lease term, including the following:

  • Fixed payments
  • Variable payments that depend on an index or a rate (such as the Consumer Price Index or a market rate), measured using the index or rate as of the commencement of the lease term
  • Variable payments that are fixed in substance
  • Residual value guarantee payments that are fixed in substance
  • Less any lease incentives payable to the lessee

The future lease payments are to be discounted using the interest rate the lessor charges the lessee. If the rate is not specifically stated, then the current interest rate the lessor would be charged at the inception of the lease to borrow the funds necessary to purchase the asset should be used.

Variable payments based on future performance of the lessee or usage of the underlying asset should not be included in the measurement of the lease receivable. Rather, those variable payments should be recognized as revenue in the period in which it was earned using revenue account 4120080.

The deferred inflow of resources is equal to the sum of the lease receivable, lease payments received from the lessee at or before the commencement of the lease term that relate to future periods (for example, the final month’s rent), less any lease incentives paid to, or on behalf of, the lessee at or before the commencement of the lease term.

The deferred inflow on leases should equal the sum of the initial measurement of the lease receivable and any lease payments received from the lessee at or before the commencement of the lease term that relate to future periods (for example, the final month’s rent), less any lease incentives paid to, or on behalf of, the lessee at or before the commencement of the lease term.

The following amortization schedule from FPMT is the basis for the amounts in the following illustrative entries and instructions.

Individual Receivable Lease Amortization Schedule

The following amortization schedule from FPMT is the basis for the amounts in the illustrative entries and instructions in Section 40.60.30.1.

Expand All

Unique Identifier

LA0001

Lease Term

3

Lease Number

SRL-123456-R

Useful Life

 

Asset Type

Land

Interest Rate

0.89%

Pmt No Payment Date Principal Interest Payment Lease Receivable Balance Revenue Deferred Inflow Balance

0

 

 

 

 

$835,119.36

 

$835,119.36

1

8/26/2021

23,500.00

-

23,500.00

811,619.36

23,197.76

811,921.60

2

9/26/2021

22,898.05

601.95

23,500.00

788,721.31

23,197.76

788,723.84

3

10/26/2021

22,915.03

584.97

23,500.00

765,806.28

23,197.76

765,526.08

4

11/26/2021

22,932.03

567.97

23,500.00

742,874.25

23,197.76

742,328.32

5

12/26/2021

22,949.03

550.97

23,500.00

719,925.22

23,197.76

719,130.56

6

1/26/2022

22,966.06

533.94

23,500.00

696,959.16

23,197.76

695,932.80

7

2/26/2022

22,983.09

516.91

23,500.00

673,976.07

23,197.76

672,735.04

8

3/26/2022

23,000.13

499.87

23,500.00

650,975.94

23,197.76

649,537.28

9

4/26/2022

23,017.19

482.81

23,500.00

627,958.75

23,197.76

626,339.52

10

5/26/2022

23,034.26

465.74

23,500.00

604,924.48

23,197.76

603,141.76

11

6/26/2022

23,051.35

448.65

23,500.00

581,873.14

23,197.76

579,944.00

32

3/26/2024

23,413.05

86.95

23,500.00

93,825.97

23,197.76

92,791.04

33

4/26/2024

23,430.41

69.59

23,500.00

70,395.55

23,197.76

69,593.28

34

5/26/2024

23,447.79

52.21

23,500.00

46,947.76

23,197.76

46,395.52

35

6/26/2024

23,465.18

34.82

23,500.00

23,482.58

23,197.76

23,197.76

36

7/26/2024

23,482.58

17.42

23,500.00

0.00

23,197.76

(0.00)

 

Grand Total

$835,119.36

$10,880.64

$846,000.00

 

$835,119.36

 

40.60.30.1 Right-To-Use Lease Asset Accounting

At the commencement of the lease term, the lease is recorded in the appropriate fund as follows:

Account Account Description DR CR
1010250 Lease Receivable – Short-Term $ 253,246.23  
1100040 Lease Receivable – Long-Term 581,873.14  
2200100 Deferred Inflows on Right-to-use Asset   835,119.36

Record revenue received each month as a credit to account 4030020 - Income from Property. At year end, reclassify revenue to principal and interest on leases.

Account Account Description DR CR
4030020 Income from property $ 258,500.00  
1010250   Lease Receivable – Short-Term   253,246.23
4130060   Leased Property Interest Income   5,253.77

At year-end, reduce the deferred inflow on leases and recognize a portion of the revenue. Deferred revenues should be amortized over the lease term using the straight-line method.

Account Account Description DR CR
2200100 Deferred Inflows on Right-to-use asset $ 255,175.36  
4130070 Income from leased property   255,175.36

At year-end, reclassify as short term that portion of the receivable due within the next fiscal year. At fiscal year-end, the amount of short-term receivable should be the same as the next year’s principal payment on the lease contract’s amortization schedule.

Account Account Description DR CR
1010250 Lease Receivable Short-Term $ 277,953.33  
1100040   Lease Receivable Long-Term   277,953.33

At year-end an allowance is calculated and recorded for estimated uncollectible lease receivable, if applicable. If collectability appears improved, the entry would be reversed.

Account Account Description DR CR
2200100 Deferred Inflows on Right-to-use asset $ xxx.xx  
1010260 or 1100050 Allow-Uncollectible Lease Receivable Short-Term or
Allow-Uncollectible Lease Receivable Long-Term
  xxx.xx

If the lease contract has ended at the end of the lease term, no entry is required.

If the lease contract has ended early, remove the remaining balances.

 


40.60.20.2 Proprietary Funds (Lessee) <<  40.60.30.1  >>  40.60.30.2 Governmental Funds (Lessor)

Page Manager: slocke@sbctc.edu
Last Modified: 3/7/24, 1:20 PM

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