Kensington Ltd decides to lease some equipment from Piccadilly Ltd on the following terms: \[\begin{array} { | l | r | l | } \hline \text { Duration of lease } & 15 \text { years } & \\ \hline \text { Life of leased asset } & 17 \text { years } & \\ \hline \text { Unguaranteed residual } & \$ 5,000 & \\ \hline \text { Lease payment } & \$ 6,000 & \text { at lease inception } \\ \hline \text { Annual lease payments (in arrears) } & \$ 4,500 & \text { per year (15 payments) } \\ \hline \end{array}\] If the interest rate implicit in the lease is 8%,what is the fair value of the equipment at the inception of the lease (rounded to the nearest dollar)?

A) $44 518 B) $46 094 C) $40 094 D) $48 399 A) $44 518 B) $46 094 C) $40 094 D) $48 399

The following is an extract from a lease payment schedule for Lipton Pty Limited.What is the present value of the lease liability at 30 June 2012? \[\begin{array} { | r | r | r | c | } \hline { \text { Date } } & \begin{array} { l } \text { Lease } \\ \text { payment } \end{array} & \begin{array} { l } \text { Interest } \\ \text { expense } \end{array} & \begin{array} { l } \text { Present value of } \\ \text { lease liability } \end{array} \\ \hline \text { 1-Jul-11 } & & & 17039 \\ \hline 30 - J u n - 12 & 3500 & 1704 & ? \\ \hline \end{array}\]

A) 13 539 B) 15 335 C) 15 243 D) 11 835 A) 13 539 B) 15 335 C) 15 243 D) 11 835

Exam 11: Accounting for Leases

Kensington Ltd decides to lease some equipment from Piccadilly Ltd on the following terms: Duration of lease 15 years Life of leased asset 17 years Unguaranteed residual \ 5,000 Lease payment \ 6,000 at lease inception Annual lease payments (in arrears) \ 4,500 per year (15 payments) If the interest rate implicit in the lease is 8%,what is the fair value of the equipment at the inception of the lease (rounded to the nearest dollar)?

(Multiple Choice)

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Question 21

AASB 117 defines the benefits of ownership to include:

(Multiple Choice)

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Question 22

The amount of a lease receivable recorded by the lessor for a direct finance lease should equal at the beginning of the lease term:

(Multiple Choice)

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Question 23

The discount rate to be used in calculating the present value of the minimum lease payments is the interest rate implicit to the lease,or if this is not practicable to do so,the lessor's incremental borrowing rate.

(True/False)

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Question 24

At inception of the lease,what is the cost basis of an asset acquired from a lease arrangement when the lease is classified as a finance lease?

(Multiple Choice)

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Question 25

The following is an extract from a lease payment schedule for Lipton Pty Limited.What is the present value of the lease liability at 30 June 2012? Date Lease payment Interest expense Present value of lease liability 1-Jul-11 17039 30-Jun-12 3500 1704 ?

(Multiple Choice)

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Question 26

AASB 117 applies to accounting for leases,including those that relate to lease arrangements to explore for or use natural resources.

(True/False)

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Question 27

The depreciation policy for depreciable leased assets shall be consistent with:

(Multiple Choice)

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Question 28

Operating leases are capitalised for inclusion in the statement of financial position.

(True/False)

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Question 29

At the commencement of the lease term,lessees are to recognise finance leases as assets and liabilities in their statements of financial position measured at the lower of the fair value of the leased asset and the present value of minimum lease payment,determined at the inception of the lease.

(True/False)

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Question 30

Under AASB 117,operating leases require the following disclosures by lessees:

(Multiple Choice)

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Question 31

The following journal entry,in the books of Lessee Pty Limited,records the lease payment made at 30 June 2012.The actual lease payment,the present value of which was included in the calculation of minimum lease payments at the inception of the lease,is: 30 June 2012 Executory expense 10000 Interest expense 13000 Lease liability 87000 Cash 110000

(Multiple Choice)

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Question 32

Hoof & Tail Ltd enters into a non-cancellable lease agreement with Equine Industries to lease some equipment under the following conditions: Duration of the lease 9 years Life of leased asset 11 years Unguaranteed residual \ 6,000 Lease payment \ 7,000 at lease inception Lease payments (in arrears) \ 5,000 per year (9 payments) The interest rate implicit in the lease is 11% and the fair value of the asset at the inception of the lease is $37 031.What are the journal entries to record the lease,the payment at lease inception and the first lease payment in the books of the lessee (rounded to the nearest dollar)?

(Multiple Choice)

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Question 33

Contingent rent is included in the determination of minimum lease payments under AASB 117 Leases.

(True/False)

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Question 34

Where a sale and leaseback results in the creation of an operating lease and the sales price varies from the fair value of the asset,the lessee:

(Multiple Choice)

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Question 35

A non-cancellable lease,which transfers the risks and rewards associated with asset ownership,can still be terminated early with the permission of the lessor.

(True/False)

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Question 36

Schwann Ltd enters into a non-cancellable 5-year lease for office space in Bigtown's central business district.The building has an expected remaining life of 40 years.Schwann Ltd has been offered a free fit-out of the office as an incentive to take up the lease.The fit-out would have cost Schwann Ltd $90 000 to do itself.The benefits of the fit-out are to be recognised on a straight-line basis.The rental payments are $110 000 per annum.How would the signing of the lease and the first rental payment be recorded by Schwann Ltd?

(Multiple Choice)

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Question 37

Over the term of the lease,the rental payments to the lessor represent a payment of principal plus interest.

(True/False)

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Question 38

If a lease transfers ownership of the property to the lessee,or contains a bargain purchase option,then this is consistent with the lease being an operating lease.

(True/False)

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Question 39

A finance lease in which the lessor provides the financial resources to acquire an asset and retains ownership while the control of the asset and the risks and benefits of ownership pass to the lessee,may be considered from the perspective of the lessor to be a(n):

(Multiple Choice)

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Question 40

Showing 21 - 40 of 81

Exam 11: Accounting for Leases

AASB 117 defines the benefits of ownership to include:

The amount of a lease receivable recorded by the lessor for a direct finance lease should equal at the beginning of the lease term:

The discount rate to be used in calculating the present value of the minimum lease payments is the interest rate implicit to the lease,or if this is not practicable to do so,the lessor's incremental borrowing rate.

At inception of the lease,what is the cost basis of an asset acquired from a lease arrangement when the lease is classified as a finance lease?

The following is an extract from a lease payment schedule for Lipton Pty Limited.What is the present value of the lease liability at 30 June 2012? Date Lease payment Interest expense Present value of lease liability 1-Jul-11 17039 30-Jun-12 3500 1704 ?

AASB 117 applies to accounting for leases,including those that relate to lease arrangements to explore for or use natural resources.

The depreciation policy for depreciable leased assets shall be consistent with:

Operating leases are capitalised for inclusion in the statement of financial position.

At the commencement of the lease term,lessees are to recognise finance leases as assets and liabilities in their statements of financial position measured at the lower of the fair value of the leased asset and the present value of minimum lease payment,determined at the inception of the lease.

Under AASB 117,operating leases require the following disclosures by lessees:

Contingent rent is included in the determination of minimum lease payments under AASB 117 Leases.

Where a sale and leaseback results in the creation of an operating lease and the sales price varies from the fair value of the asset,the lessee:

A non-cancellable lease,which transfers the risks and rewards associated with asset ownership,can still be terminated early with the permission of the lessor.

Over the term of the lease,the rental payments to the lessor represent a payment of principal plus interest.

If a lease transfers ownership of the property to the lessee,or contains a bargain purchase option,then this is consistent with the lease being an operating lease.

A finance lease in which the lessor provides the financial resources to acquire an asset and retains ownership while the control of the asset and the risks and benefits of ownership pass to the lessee,may be considered from the perspective of the lessor to be a(n):

An Overview of the Australian External Reporting Environment

The Conceptual Framework of Accounting and Its Relevance to Financial Reporting

Theories of Accounting

An Overview of Accounting for Assets

Depreciation of Property, plant and Equipment

Revaluations and Impairment Testing of Non-Current Assets

Inventory

Accounting for Intangibles

Accounting for Heritage Assets and Biological Assets

An Overview of Accounting for Liabilities

Accounting for Employee Benefits

Share Capital and Reserves

Accounting for Financial Instruments

Revenue Recognition Issues

The Statement of Comprehensive Income and Statement of Changes in Equity

Accounting for Share-Based Payments

Accounting for Income Taxes

The Statement of Cash Flows

Accounting for the Extractive Industries

Accounting for General Insurance Contracts

Accounting for Superannuation Plans

Events Occurring After the End of the Reporting Period

Segment Reporting

Related Party Disclosures

Earnings Per Share

Accounting for Group Structures

Further Consolidation Issues I: Accounting for Intragroup Transactions

Further Consolidation Issues II: Accounting for Non-Controlling Interests

Further Consolidation Issues IV: Accounting for Changes in the Degree of Ownership of a Subsidiary

Accounting for Equity Investments,including Investments in Associates and Joint Arrangements

Accounting for Foreign Currency Transactions

Translating the Financial Statements of Foreign Operations

Accounting for Corporate Social Responsibility

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