Question 1

What is meant by the agency cost of leasing?

Accepted Answer

The user who controls the asset during t

Question 2

Which statement is correct about the "guaranteed residual value"?

Accepted Answer

A) It is assurance that the lessee will take care of the property. 
B) It is provided by the lessor. 
C) Lessor assumes the risk of the property falling below the guaranteed amount. 
D) It is not included in the minimum lease payment calculation. 
A) It is assurance that the lessee will take care of the property. 
B) It is provided by the lessor. 
C) Lessor assumes the risk of the property falling below the guaranteed amount. 
D) It is not included in the minimum lease payment calculation.

Question 3

For the following lease,determine the minimum present value calculation for the lessee.
$$\begin{array} { | l | l | } 
\hline \text { Annual payment (due at end of year) } & \$ 22,000 \
\hline \text { Lease term } & 5 \
\hline \text { Incremental rate } & 10 \% \
\hline \text { Implicit rate (unknown to lessee) } & 8 \% \
\hline \text { Unguaranteed residual value } & 15,000 \
\hline
\end{array}$$

Accepted Answer

A) 83,397 
B) 92,711 
C) 98,048 
D) 102,304 
A) 83,397 
B) 92,711 
C) 98,048 
D) 102,304

Question 4

Why do lessors prefer financing lease treatment over operating lease treatment?

Accepted Answer

A lessor generally prefers the finance l

Question 5

For the following lease,under IFRS,determine the minimum present value calculation for the lessee.
$$\begin{array} { | l | l | } 
\hline \text { Annual payment (due at end of year) } & \$ 23,150 \
\hline \text { Lease term } & 5 \
\hline \text { Incremental rate } & 8 \% \
\hline \text { Implicit rate (known to lessee) } & 6 \% \
\hline \text { Guaranteed residual value } & 10,000 \
\hline
\end{array}$$

Accepted Answer

A) 92,431 
B) 97,516 
C) 99,237 
D) 104,989 
A) 92,431 
B) 97,516 
C) 99,237 
D) 104,989

Question 6

On April 1,2017,Janus Company entered into a five-year lease for equipment.Annual lease payments are $5,000,payable at the beginning of each lease year (April 1).At the end of the lease,possession of the equipment will revert to the lessor.The equipment has an expected useful life of 5 years.Similar equipment could be purchased for $50,000 cash.Janus's incremental borrowing rate is 6%.The company has a March 31 year-end,and it uses straight-line depreciation for its property,plant,and equipment.
Required:
a.Prepare the journal entries relating to the lease and leased asset for Janus's fiscal year ending March 31,2018.
b.State the amounts related to the lease that would be reported on the March 31,2018 balance sheet,indicating the balance sheet classifications,account names,and amounts.

Accepted Answer

a.First compute the value of the lease u

Question 7

For the following lease,determine the minimum present value calculation for the lessor.
$$\begin{array} { | l | l | } 
\hline \text { Annual payment (due at end of year) } & \$ 22,000 \
\hline \text { Lease term } & 5 \
\hline \text { Incremental rate } & 10 \% \
\hline \text { Implicit rate (unknown to lessee) } & 8 \% \
\hline \text { Unguaranteed residual value } & 15,000 \
\hline
\end{array}$$

Accepted Answer

A) 83,400 
B) 92,711 
C) 98,048 
D) 102,304 
A) 83,400 
B) 92,711 
C) 98,048 
D) 102,304

Question 8

Which statement is correct respecting the criteria for determining whether a lease is an operating or a finance lease?

Accepted Answer

A) Substantially all of the risks and rewards of ownership have been transferred from the lessee to the lessor. 
B) There is a transfer of ownership to the lessee or a bargain purchase option (BPO)at the end of the lease. 
C) The lease term is a minor part of the economic life of the asset. 
D) The present value of the minimum lease payments comprises substantially 50% fair value of the leased asset. 
A) Substantially all of the risks and rewards of ownership have been transferred from the lessee to the lessor. 
B) There is a transfer of ownership to the lessee or a bargain purchase option (BPO)at the end of the lease. 
C) The lease term is a minor part of the economic life of the asset. 
D) The present value of the minimum lease payments comprises substantially 50% fair value of the leased asset.

Question 9

Which statement is correct about the "guaranteed residual value"?

Accepted Answer

A) It is not included in the minimum lease payment calculation. 
B) Lessee assumes the risk of the property falling below the guaranteed amount. 
C) Lessor assumes the risk of the property falling below the guaranteed amount. 
D) It is an executory cost in the lease arrangement. 
A) It is not included in the minimum lease payment calculation. 
B) Lessee assumes the risk of the property falling below the guaranteed amount. 
C) Lessor assumes the risk of the property falling below the guaranteed amount. 
D) It is an executory cost in the lease arrangement.

Question 10

The following are some of the characteristics of an asset available for lease:
   
Required:
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.

Accepted Answer

a.Computation of required lease payments

Question 11

For the following lease,under IFRS,determine the minimum present value calculation for the lessee.
$$\begin{array} { | l | l | } 
\hline \text { Annual payment (due at end of year) } & \$ 23,000 \
\hline \text { Lease term } & 5 \
\hline \text { Incremental rate } & 10 \% \
\hline \text { Implicit rate (known to lessee) } & 8 \% \
\hline \text { Unguaranteed residual value } & \mathrm { NA } \
\hline \text { Guaranteed residual value } & 20,000 \
\hline
\end{array}$$

Accepted Answer

A) 99,607 
B) 102,711 
C) 105,444 
D) 108,847 
A) 99,607 
B) 102,711 
C) 105,444 
D) 108,847

Question 12

The following are some of the characteristics of an asset available for lease:
   
Required:
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 finance.

Accepted Answer

a.Computation of required lease payments

Question 13

The following are some of the characteristics of an asset available for lease:
   
Required:
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.

Accepted Answer

a.Computation of required leas

Question 14

On January 1,2017,Soldier Company sold a building to Billy Bank for $40,000,000 and immediately leased it back under a 25-year non-cancellable lease at $3,208,000 per year,payable at the beginning of each year.Billy used an implicit rate of 7.3333% to determine the lease payments,and this rate is known to Soldier.The building had a carrying value of $12,000,000 on Soldier's books.
Required:
Assume that the lease is an operating lease for both the lessee and lessor.Prepare all necessary journal entries for 2017 for Soldier (the seller-lessee)and Billy (the buyer-lessor).Soldier will continue to depreciate the building on a straight-line basis over the lease term.

Accepted Answer

Assume that the lease is an operating le

Question 15

Here are the terms of a lease agreement:
   
Required:
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 finance.

Accepted Answer

a.
Computation of required lease payment

Question 16

The following are characteristics of a lease:
   
Required:
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.

Accepted Answer

@#IMG-DLM& 
The present value of MLP is 100% of th

Question 17

Here are the terms of a lease agreement:
   
Required:
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 finance.

Accepted Answer

a.Computation of required lease payments

Question 18

Why do lessees generally prefer operating lease treatment? Explain.

Accepted Answer

A lessee would rather not record the ass

Question 19

On January 1,2017,Granite Company entered a lease to rent office space.The lease requires $350,000 per year,at the beginning of each year,for 20 years.The lease is non-cancellable and non-renewable.The building's estimated useful life is 30 years,and its current fair value is estimated to be $6 million.The incremental borrowing rate is 5%.
Required:
Classify this lease and record the journal entries for the first year of the lease.

Accepted Answer

This is an operating lease because it do

Question 20

The following are some of the characteristics of an asset available for lease:
   
Required:
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.

Accepted Answer

a.Computation of required leas

What is meant by the agency cost of leasing?

Which statement is correct about the "guaranteed residual value"?

For the following lease,determine the minimum present value calculation for the lessee. Annual payment (due at end of year) \ 22,000 Lease term 5 Incremental rate 10\% Implicit rate (unknown to lessee) 8\% Unguaranteed residual value 15,000

Why do lessors prefer financing lease treatment over operating lease treatment?

For the following lease,under IFRS,determine the minimum present value calculation for the lessee. Annual payment (due at end of year) \ 23,150 Lease term 5 Incremental rate 8\% Implicit rate (known to lessee) 6\% Guaranteed residual value 10,000

For the following lease,determine the minimum present value calculation for the lessor. Annual payment (due at end of year) \ 22,000 Lease term 5 Incremental rate 10\% Implicit rate (unknown to lessee) 8\% Unguaranteed residual value 15,000

Which statement is correct respecting the criteria for determining whether a lease is an operating or a finance lease?

Which statement is correct about the "guaranteed residual value"?

For the following lease,under IFRS,determine the minimum present value calculation for the lessee. Annual payment (due at end of year) \ 23,000 Lease term 5 Incremental rate 10\% Implicit rate (known to lessee) 8\% Unguaranteed residual value Guaranteed residual value 20,000

The following are some of the characteristics of an asset available for lease: Required: 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: Required: 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.

Why do lessees generally prefer operating lease treatment? Explain.

The following are some of the characteristics of an asset available for lease: Required: 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.

Current Liabilities and Contingencies

Non-Current Financial Liabilities

Equities

Complex Financial Instruments

Earnings Per Share

Accounting for Income Taxes

Pensions and Other Employee Future Benefits

Statement of Cash Flows

Accounting Changes

Filters

Exam 18: Accounting for Leases

What is meant by the agency cost of leasing?

Which statement is correct about the "guaranteed residual value"?

For the following lease,determine the minimum present value calculation for the lessee. Annual payment (due at end of year) \ 22,000 Lease term 5 Incremental rate 10\% Implicit rate (unknown to lessee) 8\% Unguaranteed residual value 15,000

Why do lessors prefer financing lease treatment over operating lease treatment?

For the following lease,under IFRS,determine the minimum present value calculation for the lessee. Annual payment (due at end of year) \ 23,150 Lease term 5 Incremental rate 8\% Implicit rate (known to lessee) 6\% Guaranteed residual value 10,000

For the following lease,determine the minimum present value calculation for the lessor. Annual payment (due at end of year) \ 22,000 Lease term 5 Incremental rate 10\% Implicit rate (unknown to lessee) 8\% Unguaranteed residual value 15,000

Which statement is correct respecting the criteria for determining whether a lease is an operating or a finance lease?

Which statement is correct about the "guaranteed residual value"?

For the following lease,under IFRS,determine the minimum present value calculation for the lessee. Annual payment (due at end of year) \ 23,000 Lease term 5 Incremental rate 10\% Implicit rate (known to lessee) 8\% Unguaranteed residual value Guaranteed residual value 20,000

The following are some of the characteristics of an asset available for lease: Required: 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: Required: 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.

Why do lessees generally prefer operating lease treatment? Explain.

The following are some of the characteristics of an asset available for lease: Required: 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.

Current Liabilities and Contingencies

Non-Current Financial Liabilities

Equities

Complex Financial Instruments

Earnings Per Share

Accounting for Income Taxes

Pensions and Other Employee Future Benefits

Statement of Cash Flows

Accounting Changes

Filters