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here were going to be looking at an operating lease and an operating lease is the same as a capital lease except with these exceptions here the lit for the lessees accounting the asset lease does not appear on Alessis balance sheet only they recognize the rent expense for the current period of the asset leased and from the lessers accounting perspective here the ownership of the asset remains with the lessor and then its depreciated and expenses are incurred for the asset here by the lessor so lets go look at our example here first thing were going to have to do is were going to have to set up a lease amortization schedule and well be using the effective interest method here and were doing that here just to calculate the interest expense on this lace so first looking at our example here we have an operating lease one year lease 10 year life of the asset a nine and a half percent implied interest rate in the fair value is $150,000 and were going to calculate our present value
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