Exam 18: Accounting for Leases

Here are the terms of a lease agreement: Fair value of leased asset 50,000 Lease term 5 years Payment frequency Annual Payment timing End of year Guaranteed residual value 0 Interest rate implicit in lease (known to lessee) 5\% Lessee's incremental borrowing rate 5\% Requirements: a.Determine the amount of lease payment that the lessor would require to lease the asset. b.Compute the present value of minimum lease payments for the lessee.

The following are characteristics of a lease: Price of leased asset from manufacturer 193,000 Lease payments 50,000 Lease term 5 years Lease frequency Annual Payment timing End of year Guaranteed residual value 35,000 Interest rate implicit in the lease agreement 14\% Requirement Determine the appropriate classification for this lease for the lessor (who is not the manufacturer)and record the journal entries for the lessor for the first year of the lease.

What is the incremental borrowing rate?

For the following lease,determine the minimum lease payments for the lessee. Annual lease payment at the end of the end \ 23,000 Lease term 5 Incremental rate 10\% Implicit rate (knownto lessee) 8\% Unguaranteed residual value 5,000 Guaranteed residual value 20,000

Which statement is not correct?

Which is not an indicator to classify the lease as a "finance" lease?

The following are some of the characteristics of an asset available for lease: Fair value of leased asset 88,000 Useful life 10 years Lease term 7 years Payment frequency Annual Payment timing Beginning of year Guaranteed residual value 10,000 Interest rate implicit in lease (not known to lessee) 10\% Lessee's incremental borrowing rate 8\% Requirements: a.Determine the amount of lease payment that the lessor would require to lease the asset. b.Compute the present value of minimum lease payments for the lessee.

For the following lease,determine the minimum lease payments for the lessee. Annual lease payment at the end of the end \ 23,150 Lease term 5 Incremental rate 8\% Implicit rate (knownto lessee) 6\% Guaranteed residual value 10,000

The following are some of the characteristics of an asset available for lease: Fair value of leased asset 120,000 Useful life 10 years Lease term 7 years Payment frequency Annual Payment timing Beginning of year Unguaranteed residual value 10,000 Interest rate implicit in lease (not known to lessee) 15\% Lessee's incremental borrowing rate 14\% Requirements: a.Determine the amount of lease payment that the lessor would require to lease the asset. b.Compute the present value of minimum lease payments for the lessee. c.Compute the present value of minimum lease payments for the lessor. d.Evaluate whether the lessee should classify the lease as operating or capital lease using the quantitative guidelines in ASPE.

The following are the characteristics of a lease: Fair value of leased asset 150,000 Lease payments 25,500 Lease term 7 Payment frequency Annual Payment timing End of year Guaranteed residual value None Interest rate implicit in lease 8\% Requirement: Determine the present value of minimum lease payments (MLP)and the appropriate classification of this lease for the lessee.

What are executory costs?

Here are the terms of a lease agreement: Fair value of leased asset 500,000 Lease term 10 years Payment frequency Annual Payment timing End of year Guaranteed residual value 0 Interest rate implicit in lease (known to lessee) 6\% Lessee's incremental borrowing rate 6\% Requirement: Determine the amount of lease payment that the lessor would require to lease the asset.

Which entries are not needed by the lessee for a finance lease?

On May 1,2012,Janus Company entered into a five-year lease for equipment.Annual lease payments are $5,000,payable at the beginning of each lease year (May I).At the end of the lease,possession of the equipment will revert to the lessor.The equipment has an expected useful life of 10 years.Similar equipment could be purchased for $90,000 cash.Janus's incremental borrowing rate is 6%.The company has a April 30 year-end,and it uses straight-line depreciation for its property,plant,and equipment. Requirements: a.Prepare the journal entries relating to the lease and leased asset for Janus's fiscal year ending April 30,2013. b.State the amounts related to the lease that would be reported on the April 30,2013 balance sheet,indicating the balance sheet classifications,account names,and amounts.

The following are some of the characteristics of an asset available for lease: Fair value of leased asset 150,000 Lease term 8 years Payment frequency Annual Payment timing Beginning of year Guaranteed residual value 25,000 Interest rate implicit in lease (not known to lessee) 11\% Lessee's incremental borrowing rate 9\% Requirements: a.Determine the amount of lease payment that the lessor would require to lease the asset. b.Compute the present value of minimum lease payments for the lessee.