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    star25's Avatar
    star25 Posts: 1, Reputation: 1
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    #1

    Mar 28, 2009, 02:53 PM
    Finance Leases
    What accounting entries are recorded for finance leases under the sum of digits method?
    MaggieMouse's Avatar
    MaggieMouse Posts: 226, Reputation: 8
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    #2

    Apr 1, 2009, 03:07 PM

    The sum of digits method is one of the accelerated depreciation method. You need to convert that into straight-line method, for the use of the installment amount.

    Finance lease is also capital lease. Here is the entries:

    When asset is leased,
    Dr Leased equipment xxx
    Cr Lease obligation xxx

    To depreciate asset,
    Dr Depreciation xxx
    Cr Accumulated depn xxx

    To record instalment payment,
    Dr Interest expense xxx
    Dr Lease obligation xxx
    Cr Cash xxx
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