Question 1

If the residual value of a leased asset turns out to be more than the amount guaranteed by the lessee,the:

Accepted Answer

A)  lessee may reduce depreciation expense for the prior year, through a prior period adjustment, to take into account the excess. 
B)  lessor is under no obligation to compensate the lessee for the excess. 
C)  lessor must pay the lessee the amount of the excess. 
D)  lessee may reduce the annual rentals for the excess. 
A)  lessee may reduce depreciation expense for the prior year, through a prior period adjustment, to take into account the excess. 
B)  lessor is under no obligation to compensate the lessee for the excess. 
C)  lessor must pay the lessee the amount of the excess. 
D)  lessee may reduce the annual rentals for the excess.

Question 2

List the guidelines required under ASPE that are used to determine whether a lease is a finance lease from the lessors point of view?

Accepted Answer

(1)reasonable assurance that lessee will

Question 3

A lease agreement includes the following provisions: Inception: 1/1/x0
Annual lease payments of $6,000 are due 12/31/x0,x1,x2
Annual lease payments of $4,000 are due 12/31/x3,x4,x5
There are 6 lease payments in all
Lessor's implicit rate of return: 12%
This is a finance lease to the lessor
How much interest revenue is recognized in 20x0 by the lessor (assume a calendar year fiscal year)?

Accepted Answer

A)  $3,600 
B)  $3,419 
C)  $2,550 
D)  $2,118 
A)  $3,600 
B)  $3,419 
C)  $2,550 
D)  $2,118

Question 4

All four finance lease criteria must be met in order for a lease to be deemed a finance lease.

Accepted Answer

A) True 
 B)False

Question 5

All of the following are methods of avoiding capitalization except:

Accepted Answer

A)  legal agreement. 
B)  use of contingent rent. 
C)  use of a third party. 
D)  shorten the lease term. 
A)  legal agreement. 
B)  use of contingent rent. 
C)  use of a third party. 
D)  shorten the lease term.

Question 6

The term of a finance lease includes the initial lease term and any bargain renewal terms.

Accepted Answer

A) True 
 B)False

Question 7

The lessee's incremental borrowing rate is the rate that,at the inception of the lease,the lessee would have incurred to borrow over a similar term the funds necessary to purchase the leased asset.

Accepted Answer

A) True 
 B)False

Question 8

A sale and leaseback occurs when one party sells an asset to a second party who then leases it back to the first party.

Accepted Answer

A) True 
 B)False

Question 9

Ryan Corp.leased an asset from Amanda Corp.under a finance lease.The original entry for finance lease included a debit to leased asset for $75,000.Amortization on the asset amounted to $7,500.At the end of the year,the lease liability on the books was $64,567.What is the temporary difference?

Accepted Answer

The answer of Ryan Corp.leased an asset from Amanda Corp.under...

Question 10

Under both operating and finance leases,periodic rent expense for a lessee is likely to be the same over successive periods.

Accepted Answer

A) True 
 B)False

Question 11

Company X leased an asset to Y on December 31 2014 with the first payment occurring on that date.The lease was a sales-type lease (it met all the conditions).The cash payment on December 31,2014 was $1,582 representing 1/5th of the lease arrangement.Assuming that the profit on the sales amounted to 11% of the total lease receivable and the unearned finance revenue was 1.57 times the profit on the sale,prepare the journal entry at the inception of the lease (use the gross profit method).

Accepted Answer

Total lease receivable: 1,582

Question 12

For a finance lease,an amount equal to the present value at the beginning of the lease term of minimum lease payments during the lease term,excluding that portion of the payments representing executory costs such as insurance,maintenance,and property taxes to be paid by the lessor,together with any profit thereon,should be recorded by the lessee as a(n):

Accepted Answer

A)  expense. 
B)  asset but not a liability. 
C)  liability but not an asset. 
D)  asset and a liability. 
A)  expense. 
B)  asset but not a liability. 
C)  liability but not an asset. 
D)  asset and a liability.

Question 13

RST leased equipment from MNO to be used in its warehouse.The lease term is five years.RST spent $5,000 for ordinary repairs during the second year of the lease.RST should:

Accepted Answer

A)  expense the $5,000 immediately. 
B)  write off $5,000 at the end of the lease term. 
C)  capitalize the $5,000 permanently in the lease account. 
D)  amortize the $5,000 over the life of the lease on a reasonable basis. 
A)  expense the $5,000 immediately. 
B)  write off $5,000 at the end of the lease term. 
C)  capitalize the $5,000 permanently in the lease account. 
D)  amortize the $5,000 over the life of the lease on a reasonable basis.

Question 14

WXZ entered into a direct financing lease with TUV for the use of an asset which cost WXZ $240,000.The lease agreement contained a bargain purchase option effective immediately after the fifth rental,which provided that TUV could purchase the asset at that time.The estimated life of the asset was 10 years with an estimated residual value of $400.TUV's annual depreciation expense is (use straight- line):

Accepted Answer

A)  $22,200 
B)  $23,960 
C)  $44,400 
D)  $48,000 
A)  $22,200 
B)  $23,960 
C)  $44,400 
D)  $48,000

Question 15

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

Accepted Answer

(a)$10,000 = LP(PVA,.10,3)+ $1,000(PV1,.

Question 16

The depreciation period used by the lessee for a depreciable leased asset must be:

Accepted Answer

A)  the same period that was used by the lessor. 
B)  the remaining life of the asset from the lease inception. 
C)  the term of the lease. 
D)  at most the term of the lease but possibly longer if title is transferred at end of lease. 
A)  the same period that was used by the lessor. 
B)  the remaining life of the asset from the lease inception. 
C)  the term of the lease. 
D)  at most the term of the lease but possibly longer if title is transferred at end of lease.

Question 17

Amanda Company leased an office building for six years for an annual rent of $170,000.The lessor agreed to forgive the first year of the lease (i.e.payments would not begin until the second year).The entry in the second year would include a debit to:

Accepted Answer

A)  rent expense-$28,333. 
B)  rent expense-$141,667. 
C)  rent expense-$170,000. 
D)  rent expense-some other amount. 
A)  rent expense-$28,333. 
B)  rent expense-$141,667. 
C)  rent expense-$170,000. 
D)  rent expense-some other amount.

Question 18

Executory costs include:

Accepted Answer

A)  finance expense incurred. 
B)  annual lease rentals paid. 
C)  insurance premiums. 
D)  leasehold improvements. 
A)  finance expense incurred. 
B)  annual lease rentals paid. 
C)  insurance premiums. 
D)  leasehold improvements.

Question 19

For an operating lease,the amount initially capitalized by the lessee is the present value of the lease rents to be paid over the lease term.

Accepted Answer

A) True 
 B)False

Question 20

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.

Accepted Answer

A) True 
 B)False

If the residual value of a leased asset turns out to be more than the amount guaranteed by the lessee,the:

List the guidelines required under ASPE that are used to determine whether a lease is a finance lease from the lessors point of view?

All four finance lease criteria must be met in order for a lease to be deemed a finance lease.

All of the following are methods of avoiding capitalization except:

The term of a finance lease includes the initial lease term and any bargain renewal terms.

The lessee's incremental borrowing rate is the rate that,at the inception of the lease,the lessee would have incurred to borrow over a similar term the funds necessary to purchase the leased asset.

A sale and leaseback occurs when one party sells an asset to a second party who then leases it back to the first party.

Ryan Corp.leased an asset from Amanda Corp.under a finance lease.The original entry for finance lease included a debit to leased asset for $75,000.Amortization on the asset amounted to $7,500.At the end of the year,the lease liability on the books was $64,567.What is the temporary difference?

Under both operating and finance leases,periodic rent expense for a lessee is likely to be the same over successive periods.

RST leased equipment from MNO to be used in its warehouse.The lease term is five years.RST spent $5,000 for ordinary repairs during the second year of the lease.RST should:

The depreciation period used by the lessee for a depreciable leased asset must be:

Amanda Company leased an office building for six years for an annual rent of $170,000.The lessor agreed to forgive the first year of the lease (i.e.payments would not begin until the second year).The entry in the second year would include a debit to:

Executory costs include:

For an operating lease,the amount initially capitalized by the lessee is the present value of the lease rents to be paid over the lease term.

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.

The Framework for Financial Reporting

Accounting Judgements

Statements of Income and Comprehensive Income

Statements of Financial Position and Changes in Equity; Disclosure Notes

The Statement of Cash Flows

Revenue Recognition

Cost-Based Inventories and Cost of Sales

Long-Lived Assets

Depreciation, Amortization, and Impairment

Financial Instruments: Investments in Bonds and Equity Securities

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Exam 7: Financial Assets: Cash and Receivables

If the residual value of a leased asset turns out to be more than the amount guaranteed by the lessee,the:

List the guidelines required under ASPE that are used to determine whether a lease is a finance lease from the lessors point of view?

All four finance lease criteria must be met in order for a lease to be deemed a finance lease.

All of the following are methods of avoiding capitalization except:

The term of a finance lease includes the initial lease term and any bargain renewal terms.

The lessee's incremental borrowing rate is the rate that,at the inception of the lease,the lessee would have incurred to borrow over a similar term the funds necessary to purchase the leased asset.

A sale and leaseback occurs when one party sells an asset to a second party who then leases it back to the first party.

Ryan Corp.leased an asset from Amanda Corp.under a finance lease.The original entry for finance lease included a debit to leased asset for $75,000.Amortization on the asset amounted to $7,500.At the end of the year,the lease liability on the books was $64,567.What is the temporary difference?

Under both operating and finance leases,periodic rent expense for a lessee is likely to be the same over successive periods.

RST leased equipment from MNO to be used in its warehouse.The lease term is five years.RST spent $5,000 for ordinary repairs during the second year of the lease.RST should:

The depreciation period used by the lessee for a depreciable leased asset must be:

Amanda Company leased an office building for six years for an annual rent of $170,000.The lessor agreed to forgive the first year of the lease (i.e.payments would not begin until the second year).The entry in the second year would include a debit to:

Executory costs include:

For an operating lease,the amount initially capitalized by the lessee is the present value of the lease rents to be paid over the lease term.

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.

The Framework for Financial Reporting

Accounting Judgements

Statements of Income and Comprehensive Income

Statements of Financial Position and Changes in Equity; Disclosure Notes

The Statement of Cash Flows

Revenue Recognition

Cost-Based Inventories and Cost of Sales

Long-Lived Assets

Depreciation, Amortization, and Impairment

Financial Instruments: Investments in Bonds and Equity Securities

Filters