Exam 20: Accounting for Leases

A lease that transfers substantially all the risks and benefits of ownership from the lessor to the lessee is referred to as

If a lease is structured so that the lessee pays a set rental payment each period plus an additional amount based upon usage or a change in an index, these contingent rental payments should be expensed when the contingency is likely to be met.

For a lease that contains a bargain purchase option, minimum lease payments include

Which of the following is true of a direct-financing lease?

A capital lease should be recorded in the lessee's accounts at the inception of the lease in an amount equal to

Which of the following is a required disclosure by a lessee for both capital leases and operating lease?

A lessor has an account, Equipment Leased to Others, and the related account, Accumulated Depreciation: Equipment Leased to Others, on its year-end balance sheet. How should the lease related to these accounts be classified?

On January 1, 2004, Zonal Company leased equipment to Ethan & Sons Co. for 8 years. The cost of the leased equipment was $110,000, and the fair value of the asset was $234,736.80. The lease required an annual payment of $40,000 at the beginning of each year. The interest rate implicit in the lease was 10%. Which of the following amounts should the lessor debit to Lease Receivable at the inception of the lease?

Which of the following statements is true about initial direct costs?

In a direct financing lease, the lessor's carrying value of the leased asset is less than its fair value.

On January 1, 2016, Reynolda Co. leased equipment by signing a five-year lease that required five payments of $30,000 due on January 1 of each year with the first payment due January 1, 2016. The equipment remains the property of the lessor at the end of the lease and Reynolda does not guarantee any residual value. Using a 10% cost of capital, Reynolda capitalized the lease on January 1, 2016, in the amount of $125,096. What is the amount of current portion of the lease obligation Reynolda should report on the December 31, 2017, balance sheet?

A lease transfers the right to use an identified asset for a period of time in exchange for rental payments.

The identified asset in the lease must be physically distinct and not substitutable.

A direct financing capital lease results in a manufacturers or dealers profit or loss and meets one or more of the capitalization criteria and both of the recognition criteria.

In a direct-financing lease, the guaranteed residual value by an unrelated third party is not included while calculating the lease receivable.

The lessee should report capital lease obligations on the balance sheet as

When a lessor receives cash on an operating lease, which of the following accounts is increased?

On January 1, 2016, Christopher Properties sold a building to another company and immediately leased it back again. The Christopher' book value for the building was $15,480. The lease was for five years with $5,000 payable at the end of each year. The payments, discounted at 11%, equaled $18,480. Which entry would Christopher Properties not make in 2016?

Which of the following amortization policies is correct for a capital lease of both land and buildings that transfers title or contains a bargain purchase option?

Unlike in a direct-financing lease, the fair value in a sales-type lease does not equal the carrying cost of the leased asset.