Lessor	Lessee
Risk and benefits of ownership remain with lessor	Operating lease	Operating lease
Risk and benefits of ownership transfer to lessee	Direct financial lease Sales-type lease	Capital lease

Term Overview
• Lessor
• Lessee
• MLP[Minimum Lease Payments]
• the lessor's implicit interest

Criteria
1. Ownership transfers at end of lease
2. Written option for bargain purchase
3. 90 % of leased property FMV < PV of future lease payment
4. 75 % of asset economic life is committed in lease term

		[Dr]Leased Equipment Under Capital Lease ##,###
			[Cr]Obligation Under Capital Lease ##,###


		[Dr]Amortization Expense on Leases Equipment ##,###
			[Cr]Accumulated Amortization of
				Leased Equipment Under Capital Lease ##,###

       (Case I )[Dr]Obligation	     ##,###
			[Cr]Cash		##,###


       (Case II)[Dr]Interest Expense ##,###
			[Cr]Accrued Interest Payable	##,###


		[Dr]Accrued Interest Payable	##,###
		[Dr]Obligation Under Capital Lease ##,###
					[Cr]Cash	##,###
		

		[Dr]Gross Investment in Lease	##,###
		[Dr]Cost of Goods Sold		##,###
		[Dr]Selling Expenses		##,###
				[Cr]Sales Revenue	##,###
				[Cr]Equipment		##,###
				[Cr]Unearned Interest	##,###
				[Cr]Cash		##,###
		

		[Dr]Cash			##,###
				[Cr]Lease receivable	##,###
		[Dr]Unearned interest revenue	##,###
				[Cr]Interest revenue	##,###


		

1. Gross method
2. Net method

Lessee

		[Dr]Leased Assets	##,###
				[Cr]Obligation	##,###

		[Dr]Interest Expense	##,###
		[Dr]Obligation		##,###
				[Cr]Cash	##,###

		[Dr]Interest Expense	##,###
		[Dr]Obligation		##,###
				[Cr]Cash	##,###

		[Dr]Obligation		##,###
		[Dr]AD			##,###
				[Cr]Leased Assets	##,###
		

1. substantially all case(PV of the rental payments >= 90 % FMV)

   		[Dr]Cash		##,##
   				[Cr]Assets		##,###
   				[Dr]Deferred gain	##,###
   
   		/*operating lease*/
   		[Dr]Deferred gain	##,###
   				[Cr]Rent expense	##,###
   
   		/*capital lease*/
   		case 1
   		[Dr]Deferred gain	##,###
   				[Cr]Gain on sale of assets ##,###
   
   		case 2
   		[Dr]Deferred gain	##,###
   				[Cr]Depreciation expense   ##,###
   		

2. Minor portion case(PV of rental payments =< FMV of the assets of 10 % )

   		[Dr]Cash		##,###
   				[Cr]Assets		##,###
   				[Cr]Gain		##,###
   		

3. FMV of the assets of 10 % < PV of the rental payments < FMV of the assets of 90 %

   		[Dr]Cash		##,###
   				[Cr]Assets		##,###
   				[Cr]Gain		##,###
   				[Cr]Deferred Gain	##,###
   				
   		

1. Lessee
   1. Capital leases
      • the gross amount of assets recorded under capital assets
      • the future MLP in the aggregate
      • the future MLP for each of the succeeding 5 years
   2. Operating leases with initial or remaining noncancelable term in excess of 1 year
      • the future minimum rental payments in agggregate
      • the future minimum rental payments for each of next 5 years
      • a general description of leasing arrangements
2. Lessor
   1. Sales-type & Direct financing leases
      the net investment components
      • future MLP
      • URV[unguaranteed residual value]
      • unearned income
      • the future MLP to be received in each of the succeeding 5 years
   2. Operating leases
      • cost
      • carrying amount
      • total accumulated depreciation
      • the minimum future rentals on noncancelable leases in aggregate
      • the minimum future rentals on noncancelable leases for each of the next 5 years