Exam 10: Leases

Barry Limited and Allen Limited enter into a finance lease agreement with the following terms: -lease term is 4 years -estimated economic life of the leased asset is 5 years -4 × annual rental payments of $15 000 each payable in advance -residual value at the end of the lease term is not guaranteed by the lessee -interest rate implicit in the lease is 8%. On inception date, the present value of the lease payments is:

On 1 July 2021, One Ltd leased a network server from Short Ltd. The server had cost Short Ltd $32 000 on the same day. The lease agreement cost Short Ltd $1390 to set up and included the following: Lease term 15 years: Estimated economic life of the network server 10 years: The lease is cancellable Annual rental payment (in arrears) \6 ,500 Residual value at end of lease term \2 4,000 Residual guarantee by One Ltd \0 Interest rate implicit in the lease 8\% The journal entry recorded by the lessor to recognise the initial direct costs incurred would be: a. DR Lease expense \ 1390 CR Cash \ 1390 b. DR Deferred initial direct costs - equipment \ 1390 CR Cash \ 1390 c. DR Lease expense \ 1390 CR Deferred initial direct costs - equipment \ 1390 d. DR Cash \ 1390 CR Deferred initial direct costs - equipment \ 1390

At the commencement of the lease agreement the lessor recognises the balance of the lease receivable as the:

Under AASB 16/IFRS 16 Leases, lessees are required to disclose which of the following? I. Interest expense on lease liabilities II. Income from subleasing right-of-use assets III. Gains or losses arising from sale and leaseback transaction IV. Expenses relating to short-term leases

On 1 July 2021, One Ltd leased a network server from Short Ltd. The server had cost Short Ltd $32 000 on the same day. The lease agreement cost Short Ltd $1390 to set up and included the following: Lease term 15 years: Estimated economic life of the network server 10 years: The lease is cancellable Annual rental payment (in arrears) \6 ,500 Residual value at end of lease term \2 4,000 Residual guarantee by One Ltd \0 Interest rate implicit in the lease 8\% The journal entry recorded by the lessor for the annual recognition of the initial direct costs would be: a. DR Deferred initial direct costs - equipment \2 78 CR Lease expense \2 78 b. DR Lease expense \2 78 CR Cash \2 78 c. DR Cash \2 78 CR Deferred initial direct costs - equipment \ 278 d. DR Lease expense \2 78 CR Deferred initial direct costs - equipment \2 78

A finance lease is defined in AASB 16/IFRS 16 as:

Which of the following is included within the scope of AASB 16/IFRS 16?

The preface to AASB 16/IFRS 16 Leases states that the new standard will:

Nichols Ltd manufactures specialised machinery for both sale and lease. On 1 July 2021, Nichols leased a machine to Pontine Ltd. The costs incurred by Nichols to set up the lease agreement were $1690. The machine cost Nichols Ltd $210 000 to manufacture, and its fair value at the inception of the lease was $232 890. The interest rate implicit in the lease is 10%, which is in line with current market rates. Under the terms of the lease, Pontine Ltd has guaranteed $22 000 of the asset's expected residual value of $40 000 at the end of the 5-year lease term. Pontine Ltd agreed to pay an annual lease payment of $55 000 with the first payment due at the end of the first year. The debit to the sales revenue account in Nichols' books is:

Barry Limited and Allen Limited enter into a finance lease agreement with the following terms: -lease term is 4 years -estimated economic life of the leased asset is 5 years -4 × annual rental payments of $15 000 each payable in advance -residual value at the end of the lease term is not guaranteed by the lessee -interest rate implicit in the lease is 8%. The journal entry recorded by the lessor when the first lease payment is received would be:

AASB 16/IFRS 16 requires manufacturer and dealer lessors to recognise selling profit or loss:

Which of the following is not one of the steps in the classification process of a finance lease?

The new accounting standard for leases, AASB 16/IFRS 16, has introduced:

According to AASB 16/IFRS 16 Leases, because lease payments are received from the lessee over the lease term, the receipts need to be divided into the following components: I II III IV Reduction of the lease receivable Yes Yes No Yes Irterest reverue earned Yes No Yes No Lease receipts Yes Yes Yes No Cost of sale experse No No Yes Yes

On 30 June 2021, Monty Ltd leased a motor vehicle to Taylor Ltd. Monty Ltd had purchased the motor vehicle on that day for its fair value of $68 346. The lease agreement cost Monty $1659 to have drawn up and requires Taylor to reimburse Monty for annual insurance costs of $1500. The amount recorded as a lease receivable by Monty Ltd at the inception of the lease is:

In relation to finance leases, the following information must be disclosed separately in the financial statements of lessors: I. The undiscounted lease payments to be received on an annual basis. II. A reconciliation of the undiscounted lease payments to the net investment in the lease. III. A reconciliation of the discounted unguaranteed residual value. IV. The depreciation charge for each class of right-of-use asset.

AASB 16/IFRS 16 Leases requires lessors to account for lease receipts from operating leases as:

Which of the following is not an example of a risk of ownership of an asset?

AASB 16/IFRS 16 defines a lease as:

Which of the following is an appropriate journal entry for the recognition by a lessor of the first payment received under an operating lease arrangement?