Question 1

Of the four criteria for a capital lease,which two are not applied if the lease begins during the final quarter of the asset's useful life?

Accepted Answer

A) The 75% test and the bargain purchase option. 
B) The 90% test and the 75% test. 
C) The 90% test is the only one to which this applies. 
D) The bargain purchase and the passage of title criteria. 
A) The 75% test and the bargain purchase option. 
B) The 90% test and the 75% test. 
C) The 90% test is the only one to which this applies. 
D) The bargain purchase and the passage of title criteria. B

Question 2

Listed below are five terms followed by a list of phrases that describe or characterize each of the terms.Match each phrase with the number for the most correct term.

Accepted Answer

The answer of Listed below are five terms followed by...

Question 3

What are the three types of expenses that a lessee experiences with a capital lease?

Accepted Answer

A) Lease expense,executory costs,interest expense. 
B) Depreciation expense,lease expense,interest expense. 
C) Executory costs,lease expense,depreciation expense. 
D) Depreciation expense,interest expense,executory costs. 
A) Lease expense,executory costs,interest expense. 
B) Depreciation expense,lease expense,interest expense. 
C) Executory costs,lease expense,depreciation expense. 
D) Depreciation expense,interest expense,executory costs. D

Question 4

Which of the following is not among the criteria for classifying a lease as a capital lease?

Accepted Answer

A) The agreement specifies that ownership of the asset transfers to the lessee. 
B) The agreement contains a bargain purchase option. 
C) The noncancelable lease term is equal to 90% or more of the expected economic life of the asset. 
D) The present value of the minimum lease payments is equal to or greater than 90% of the fair value of the asset. 
A) The agreement specifies that ownership of the asset transfers to the lessee. 
B) The agreement contains a bargain purchase option. 
C) The noncancelable lease term is equal to 90% or more of the expected economic life of the asset. 
D) The present value of the minimum lease payments is equal to or greater than 90% of the fair value of the asset.

Question 5

A noncancelable lease contains a bargain purchase option.The fair value of the asset exceeds the lessor's cost of the asset.Collectibility of the lease payments is assured and there are no material cost uncertainties surrounding the lease.Therefore,the lease will be accounted for by the lessor as a(n):

Accepted Answer

A) Sales-type lease. 
B) Direct financing lease. 
C) Operating lease. 
D) Guaranteed lease. 
A) Sales-type lease. 
B) Direct financing lease. 
C) Operating lease. 
D) Guaranteed lease.

Question 6

Costs incurred by the lessor that are associated directly with originating a lease and are essential to acquire that lease are called initial direct costs.Initial direct costs are matched with the interest revenues they help generate in:

Accepted Answer

A) An operating lease. 
B) A capital lease. 
C) A direct financing lease. 
D) A sales-type lease. 
A) An operating lease. 
B) A capital lease. 
C) A direct financing lease. 
D) A sales-type lease.

Question 7

Use the following to answer questions 
Refer to the following lease amortization schedule.The 10 payments are made annually starting with the inception of the lease.Title does not transfer to the lessee and there is no bargain purchase option or guaranteed residual value.The asset has an expected economic life of 12 years.The lease is noncancelable.
  
-What would the lessee record as annual depreciation on the asset using the straight-line
Method?

Accepted Answer

A) $ 5,328. 
B) $ 6,328. 
C) $ 6,392. 
D) $10,000. 
A) $ 5,328. 
B) $ 6,328. 
C) $ 6,392. 
D) $10,000.

Question 8

What lease disclosures are required of the lessor and lessee?

Accepted Answer

Lease disclosure requirements are quite

Question 9

Use the following to answer questions 
Refer to the following lease amortization schedule.The 10 payments are made annually starting with the inception of the lease.Title does not transfer to the lessee and there is no bargain purchase option or guaranteed residual value.The asset has an expected economic life of 12 years.The lease is noncancelable.
  
-What is the effective annual interest rate?

Accepted Answer

A) 9%. 
B) 10%. 
C) 11%. 
D) 12%. 
A) 9%. 
B) 10%. 
C) 11%. 
D) 12%.

Question 10

Use the following to answer questions 
Refer to the following lease amortization schedule.The five payments are made annually starting with the inception of the lease.A $2,000 bargain purchase option is exercisable at the end of the five-year lease.The asset has an expected economic life of eight years.
  
-What would the lessee record as annual depreciation on the asset using the straight-line method,assuming no residual value?

Accepted Answer

A) $3,325. 
B) $6,920. 
C) $4,325. 
D) $5,320. 
A) $3,325. 
B) $6,920. 
C) $4,325. 
D) $5,320.

Question 11

Listed below are several terms and phrases associated with leases.Pair each item from List A (by letter)with the item from List B that is most appropriately associated with it.

Accepted Answer

The answer of Listed below are several terms and phrases...

Question 12

If the lessor records deferred rent revenue at the beginning of a lease term,the lease must:

Accepted Answer

A) Be a direct financing lease. 
B) Be a sales-type lease. 
C) Contain a bargain renewal option. 
D) Be an operating lease. 
A) Be a direct financing lease. 
B) Be a sales-type lease. 
C) Contain a bargain renewal option. 
D) Be an operating lease.

Question 13

Savinsky Industries prepares its financial statements using IFRS and reports its leases as finance leases.If the company reported under U.S.GAAP,is it possible that some of the leases could be classified as an operating lease? Explain

Accepted Answer

Yes,it is possible.A finance lease under

Question 14

Distinguishing between operating and capital leases is due in large part to the accounting concept of:

Accepted Answer

A) Conservatism. 
B) Materiality. 
C) Substance over form. 
D) Historical cost. 
A) Conservatism. 
B) Materiality. 
C) Substance over form. 
D) Historical cost.

Question 15

Which of the following statements characterizes a sale-leaseback arrangement?

Accepted Answer

A) The lessee also is the seller. 
B) The lessor treats the lease as an operating lease. 
C) The lessee buys the asset from a third party. 
D) The lessor's interest rate is always higher than in a capital lease. 
A) The lessee also is the seller. 
B) The lessor treats the lease as an operating lease. 
C) The lessee buys the asset from a third party. 
D) The lessor's interest rate is always higher than in a capital lease.

Question 16

L Corp.recorded a capital lease in February using an annuity due present value table.The company's December 31 statement of cash flows using the indirect method will report:

Accepted Answer

A) An addition to net income for depreciation. 
B) A cash inflow from financing activities. 
C) A cash outflow from investing activities. 
D) A cash inflow from operating activities. 
A) An addition to net income for depreciation. 
B) A cash inflow from financing activities. 
C) A cash outflow from investing activities. 
D) A cash inflow from operating activities.

Question 17

Discuss the interest rates used by the lessee and the lessor for determining the present value of a capital lease.

Accepted Answer

Since the minimum lease payments require

Question 18

If the leaseback portion of a sale-leaseback transaction is classified as a capital lease:

Accepted Answer

A) Any gain is deferred and recognized as a reduction of rent expense. 
B) Any gain is deferred and recognized as a reduction of depreciation. 
C) Any gain is recognized at the lease's inception. 
D) There can be no gain. 
A) Any gain is deferred and recognized as a reduction of rent expense. 
B) Any gain is deferred and recognized as a reduction of depreciation. 
C) Any gain is recognized at the lease's inception. 
D) There can be no gain.

Question 19

B Corp.has a debt/equity ratio of 2 to 1.Not including any indirect effects on earnings,the debt/equity ratio is increased when B records:

Accepted Answer

The answer of B Corp.has a debt/equity ratio of 2...

Question 20

In a sale-leaseback arrangement,the lessee is also:

Accepted Answer

A) The new owner of the property. 
B) The buyer. 
C) A third-party guarantor. 
D) The seller. 
A) The new owner of the property. 
B) The buyer. 
C) A third-party guarantor. 
D) The seller.

Of the four criteria for a capital lease,which two are not applied if the lease begins during the final quarter of the asset's useful life?

Listed below are five terms followed by a list of phrases that describe or characterize each of the terms.Match each phrase with the number for the most correct term.

What are the three types of expenses that a lessee experiences with a capital lease?

Which of the following is not among the criteria for classifying a lease as a capital lease?

Costs incurred by the lessor that are associated directly with originating a lease and are essential to acquire that lease are called initial direct costs.Initial direct costs are matched with the interest revenues they help generate in:

What lease disclosures are required of the lessor and lessee?

Listed below are several terms and phrases associated with leases.Pair each item from List A (by letter)with the item from List B that is most appropriately associated with it.

If the lessor records deferred rent revenue at the beginning of a lease term,the lease must:

Savinsky Industries prepares its financial statements using IFRS and reports its leases as finance leases.If the company reported under U.S.GAAP,is it possible that some of the leases could be classified as an operating lease? Explain

Distinguishing between operating and capital leases is due in large part to the accounting concept of:

Which of the following statements characterizes a sale-leaseback arrangement?

L Corp.recorded a capital lease in February using an annuity due present value table.The company's December 31 statement of cash flows using the indirect method will report:

Discuss the interest rates used by the lessee and the lessor for determining the present value of a capital lease.

If the leaseback portion of a sale-leaseback transaction is classified as a capital lease:

B Corp.has a debt/equity ratio of 2 to 1.Not including any indirect effects on earnings,the debt/equity ratio is increased when B records:

In a sale-leaseback arrangement,the lessee is also:

Environment and Theoretical Structure of Financial Accounting

Review of the Accounting Process

The Balance Sheet and Financial Disclosures

The Income Statement, comprehensive Income, and the Statement of Cash Flows

Income Measurement

Time Value of Money Concepts

Cash and Receivables

Inventories: Measurement

Inventories: Additional Issues

Property, plant, and Equipment and Intangible Assets: Acquisition and Disposition

Property, plant, and Equipment and Intangible Assets: Utilization and Impairment

Investments

Current Liabilities and Contingencies

Bonds and Long-Term Notes

Accounting for Income Taxes

Pensions and Other Postretirement Benefits

Shareholders Equity

Share-Based Compensation and Earnings Per Share

Accounting Changes

The Statement of Cash Flows

Filters

Exam 15: Leases

Of the four criteria for a capital lease,which two are not applied if the lease begins during the final quarter of the asset's useful life?

Listed below are five terms followed by a list of phrases that describe or characterize each of the terms.Match each phrase with the number for the most correct term.

What are the three types of expenses that a lessee experiences with a capital lease?

Which of the following is not among the criteria for classifying a lease as a capital lease?

Costs incurred by the lessor that are associated directly with originating a lease and are essential to acquire that lease are called initial direct costs.Initial direct costs are matched with the interest revenues they help generate in:

What lease disclosures are required of the lessor and lessee?

Listed below are several terms and phrases associated with leases.Pair each item from List A (by letter)with the item from List B that is most appropriately associated with it.

If the lessor records deferred rent revenue at the beginning of a lease term,the lease must:

Savinsky Industries prepares its financial statements using IFRS and reports its leases as finance leases.If the company reported under U.S.GAAP,is it possible that some of the leases could be classified as an operating lease? Explain

Distinguishing between operating and capital leases is due in large part to the accounting concept of:

Which of the following statements characterizes a sale-leaseback arrangement?

L Corp.recorded a capital lease in February using an annuity due present value table.The company's December 31 statement of cash flows using the indirect method will report:

Discuss the interest rates used by the lessee and the lessor for determining the present value of a capital lease.

If the leaseback portion of a sale-leaseback transaction is classified as a capital lease:

B Corp.has a debt/equity ratio of 2 to 1.Not including any indirect effects on earnings,the debt/equity ratio is increased when B records:

In a sale-leaseback arrangement,the lessee is also:

Environment and Theoretical Structure of Financial Accounting

Review of the Accounting Process

The Balance Sheet and Financial Disclosures

The Income Statement, comprehensive Income, and the Statement of Cash Flows

Income Measurement

Time Value of Money Concepts

Cash and Receivables

Inventories: Measurement

Inventories: Additional Issues

Property, plant, and Equipment and Intangible Assets: Acquisition and Disposition

Property, plant, and Equipment and Intangible Assets: Utilization and Impairment

Investments

Current Liabilities and Contingencies

Bonds and Long-Term Notes

Accounting for Income Taxes

Pensions and Other Postretirement Benefits

Shareholders Equity

Share-Based Compensation and Earnings Per Share

Accounting Changes

The Statement of Cash Flows

Filters