Exam 15: Leases

A bargain purchase option is defined as the option of purchasing leased property at a price that is equal to the expected fair value of a leased asset.

Capital leases are agreements that are formulated outwardly as leases,but are installment purchases in substance.

Titanic Corporation leased executive limos under terms of $20,000 down and four equal annual payments of $30,000 on the anniversary date of the lease.The interest rate implicit in the lease is 11%.The first year's interest expense would be:

Lone Star Company would account for this as:

Additional lessor conditions for classification as a capital lease are consistent with the criteria of:

Which of the following statements characterizes an operating lease?

XYZ Company leased equipment to West Corporation under a lease agreement that qualifies as a capital lease to West but not as a result of a bargain purchase option or a title transfer.The present value of the asset is $600,000.The expected economic life of the asset is 10 years.The lease term is five years.Using the straight-line method,what would West record as annual depreciation?

On January 1,2016,Wellburn Corporation leased an asset from Tabitha Company.The asset originally cost Tabitha $300,000.The lease agreement is an operating lease that calls for four annual payments beginning on January 1,2016,in the amount of $36,000.The other three remaining payments will be made on January 1 of each subsequent year.Which of the following journal entries should Tabitha record on January 1,2016?

The lessee's option to purchase a leased asset at a price that is sufficiently lower than the asset's expected fair value so that the exercise of the option appears reasonably assured is called a:

What is the amount of residual value guaranteed by Reagan to the lessor?

Crystal Corporation recorded a lease payment as follows: Crystal must have a(n):

Cady Salons leased equipment from SmithCo on January 1,2016,in a Type B lease.The present value of the lease payments discounted at 10% was $80,000.Ten annual lease payments of $12,000 are due at each January 1 beginning January 1,2016.Following the guidance of the new ASU,the amortization of the right-of-use asset for the reporting year ending December 31,2016,would be:

When accounting for a capital lease,the lessee records the leased asset at the present value of the minimum lease payments or the asset's fair value,whichever is lower.

On January 1,2016,Holbrook Company leased a building under a three-year operating lease.The annual rental payments are $40,000 on January 1,2016;$30,000 on January 1,2017;and $20,000 on January 1,2018. Required: Prepare the appropriate journal entries for Holbrook Company from the inception of the lease through the end of 2018.

Like other assets,the cost of a leasehold improvement is allocated as depreciation expense over its useful life to the lessee,which will be:

On January 1,2016,Gibson Corporation entered into a four-year operating lease.The payments were as follows: $20,000 for 2016,$18,000 for 2017,$16,000 for 2018,and $14,000 for 2019.What is the correct amount of lease expense for 2017?

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

J Corp.entered into an operating lease in February.The company's December 31 statement of cash flows will report:

The IASB and FASB are collaborating on a joint project intended to revise standards for accounting for leases.Briefly describe the tentative decisions of the two boards regarding the overall approach of the new standard.

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 is the outstanding balance after payment 5?