Exam 18: Leases

The recorded values of the asset(s)and corresponding liability at the inception of a finance lease (from the point of view of the lessee)will always be the same under ASPE and IFRS.

LMN correctly recorded a 5-year lease on a special machine by making the following entry on the date the lease was signed: The lease was the following:

On January 1, 2014, MU Corporation leased an asset, under an operating lease, to obtain the use of a special machine for three years.The lease payments were $9,000 per year payable at each year-end; the lessee must pay all operating expenses.At the inception date, MU Corporation should:

If a lessee does not exercise a bargain purchase option prior to its lapse date, the:

In a sale-and-leaseback agreement, the lessor is also:

Choose the correct statement regarding the terms listed in the lessor's (1)minimum lease payments and (2)net lease receivable for a capitalized lease:

Ryan Corp.enters into and sale and leaseback agreement with Geisler Corp.Ryan Corp.sold its building to Geisler Corp.for $400,000.The building had a historical cost of $600,000 and accumulated depreciation of $300,000.Ryan Corp.then leased it back from Geisler corp.for $80,000 per year for 8 years.The lease qualifies as a finance lease.It is Ryan Corp's policy to depreciate buildings over 10 years.Prepare the journal entry to record the amortization for the first year.(assume a January 1 transaction and a December 31 year end).

With respect to a lessor's indirect costs, under ASPE:

If the straight-line method is used by the lessee to amortize the non-refundable down payment in an operating lease, a constant dollar amount of the prepayment is allocated as expense to each period covered by the lease.

CDE leased equipment from HIJ on December 31, 2014, for a 10-year period (also the useful life of the asset).Equal annual payments under the lease are $50,000 and are due on December 31 of each year.The first payment was made on December 31, 2014, and the second payment was made on the next due date.The present value at December 31, 2014, of the minimum lease payments over the lease term discounted at 10 percent (the implicit rate computed by HIJ and known by CDE)was $338,000.CDE's incremental borrowing rate was 12 percent at December 31, 2014.The lease is appropriately accounted for as a finance lease by CDE.What should be the balance in CDE's liability under finance lease account at December 31, 2015?

The following information relates to a lease contract: The lessor contracted with an insurance company, which guaranteed the residual value at 1-1-x4. There are no uncertainties with respect to collectability of lease payments or performance by lessor. (a)Determine the annual lease payment (b)Classify the lease for both lessee and lessor (c)Record the 2014 entries for both parties

ABC Inc.leased a computer to the Lennox Silver Company on 1 April 2018.The terms of the lease are as follows: *** ABC Inc.company charges a half-year depreciation in the year of acquisition and a half-year in the year of disposition, regardless of the actual dates of acquisition and disposal. Suppose that at the end of the lease, the lessor tells the lessee to dispose of the asset, and to keep any proceeds in excess of the guaranteed residual value.Provide entries for the lessee on 1 April 2014, assuming that the lessee sells the asset for $2,100 and remits the required $2,000 payment to the lessor.

If the title to a leased asset does not transfer to the lessee at the end of the lease term, but third party guarantees the residual, what is the period and residual value used by the lesso to depreciate the leased asset?

The principal attribute of finance leases is that the risks and rewards of asset ownership are deemed to remain with the lessor.