Question 1

Recording a sales-type lease is similar to recording:

Accepted Answer

A) A purchase on account. 
B) An exchange of assets. 
C) A sale of a fixed asset. 
D) A sale of merchandise on account. 
A) A purchase on account. 
B) An exchange of assets. 
C) A sale of a fixed asset. 
D) A sale of merchandise on account.

Question 2

What is the effective annual interest rate charged to Reagan on this lease?

Accepted Answer

A) 4%. 
B) 6%. 
C) 8%. 
D) 17%. 
A) 4%. 
B) 6%. 
C) 8%. 
D) 17%.

Question 3

If the lessee expects to obtain title to leased property due to a bargain purchase option or passage of title at the end of the lease term:

Accepted Answer

A) The lessee ignores any residual value for the leased property. 
B) The lessor ignores any residual value for the leased property. 
C) The lessee adds the present value of the residual value to the amount recorded for the lease. 
D) The lessor will always charge a higher annual lease rate. 
A) The lessee ignores any residual value for the leased property. 
B) The lessor ignores any residual value for the leased property. 
C) The lessee adds the present value of the residual value to the amount recorded for the lease. 
D) The lessor will always charge a higher annual lease rate.

Question 4

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 outstanding balance after payment 9?

Accepted Answer

A) $ 8,929. 
B) $13,463. 
C) $ 5,000. 
D) $ 5,537. 
A) $ 8,929. 
B) $13,463. 
C) $ 5,000. 
D) $ 5,537.

Question 5

Discuss the financial statement disclosure requirements for all leases entered into by the lessee.

Accepted Answer

The lessee must reveal numerous items of

Question 6

Matt Co.is the lessor in connection with a Type B lease.Under the new ASU,Matt Co.would record:

Accepted Answer

A) Depreciation expense. 
B) A right-of-use asset. 
C) Amortization expense. 
D) Interest revenue. 
A) Depreciation expense. 
B) A right-of-use asset. 
C) Amortization expense. 
D) Interest revenue.

Question 7

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 8

If the lessor retains title to leased property under the terms of the lease:

Accepted Answer

A) The amount to be recovered through periodic lease payments is reduced by the present value of the residual amount. 
B) The amount to be recovered through periodic lease payments is increased by the present value of the residual amount. 
C) The amount to be recovered will be the same as if there were no residual value. 
D) The lessor will record a greater amount of depreciation due to the residual value. 
A) The amount to be recovered through periodic lease payments is reduced by the present value of the residual amount. 
B) The amount to be recovered through periodic lease payments is increased by the present value of the residual amount. 
C) The amount to be recovered will be the same as if there were no residual value. 
D) The lessor will record a greater amount of depreciation due to the residual value.

Question 9

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 total interest paid over the term of the lease?

Accepted Answer

A) $42,000. 
B) $ 8,200. 
C) $ 7,400. 
D) $ 3,460. 
A) $42,000. 
B) $ 8,200. 
C) $ 7,400. 
D) $ 3,460.

Question 10

S Corp.has a rate of return on assets of 10% and a debt/equity ratio of 2 to 1.Not including any indirect effects on earnings,the immediate impact of recording a capital lease on these ratios is a(an):

Accepted Answer

The answer of S Corp.has a rate of return on...

Question 11

What is a bargain purchase option and when do the parties to a lease know if it exists?

Accepted Answer

A bargain purchase option gives the less

Question 12

What is the net book value of the lease liability in Lone Star's June 30,2016,balance sheet? Round your answer to the nearest dollar.

Accepted Answer

A) $15,943,154. 
B) $17,533,246. 
C) $21,000,000. 
D) None of these answer choices is correct. 
A) $15,943,154. 
B) $17,533,246. 
C) $21,000,000. 
D) None of these answer choices is correct.

Question 13

A guaranteed residual value at the inception of a capital lease should be:

Accepted Answer

A) Excluded from minimum lease payments. 
B) Included as part of minimum lease payments at present value. 
C) Included as part of minimum lease payments at future value. 
D) Included as part of minimum lease payments only to the extent that guaranteed residual value is expected to exceed estimated residual value. 
A) Excluded from minimum lease payments. 
B) Included as part of minimum lease payments at present value. 
C) Included as part of minimum lease payments at future value. 
D) Included as part of minimum lease payments only to the extent that guaranteed residual value is expected to exceed estimated residual value.

Question 14

When the total expenses over the life of an operating lease are compared to the total expenses over the life of a capital lease,one will find that:

Accepted Answer

A) The expenses of a capital lease are greater than the expenses of the operating lease. 
B) The expenses of the capital lease and operating lease are equal. 
C) The expenses of an operating lease are greater than the expenses of a capital lease. 
D) No meaningful comparison can be made. 
A) The expenses of a capital lease are greater than the expenses of the operating lease. 
B) The expenses of the capital lease and operating lease are equal. 
C) The expenses of an operating lease are greater than the expenses of a capital lease. 
D) No meaningful comparison can be made.

Question 15

From the perspective of the lessee,leases may be classified as either:

Accepted Answer

A) Direct financing or sales-type. 
B) Capital or direct financing. 
C) Capital or operating. 
D) Direct financing or operating. 
A) Direct financing or sales-type. 
B) Capital or direct financing. 
C) Capital or operating. 
D) Direct financing or operating.

Question 16

In a lease transaction,what are initial direct costs? How do we account for initial direct costs in an operating lease,a direct financing lease,and a sales-type lease?

Accepted Answer

Any costs incurred by the lessor that ar

Question 17

The four criteria provided in GAAP for distinguishing a capital lease from an operating lease do not include:

Accepted Answer

A) The agreement specifies that ownership transfers at the end of the lease term. 
B) The collectibility of the lease payments must be reasonably predictable. 
C) The agreement contains a bargain purchase option. 
D) The noncancelable lease term is 75% or more of the useful life of the leased asset. 
A) The agreement specifies that ownership transfers at the end of the lease term. 
B) The collectibility of the lease payments must be reasonably predictable. 
C) The agreement contains a bargain purchase option. 
D) The noncancelable lease term is 75% or more of the useful life of the leased asset.

Question 18

At what amount would Reagan record the leased asset at inception of the agreement?

Accepted Answer

A) $519,115. 
B) $429,115. 
C) $540,000. 
D) $576,000. 
A) $519,115. 
B) $429,115. 
C) $540,000. 
D) $576,000.

Question 19

Barr Corp.is the lessee in a Type A lease.Under the new ASU,Barr would record:

Accepted Answer

A) Depreciation expense. 
B) A right-of-use asset. 
C) Lease expense. 
D) Interest revenue. 
A) Depreciation expense. 
B) A right-of-use asset. 
C) Lease expense. 
D) Interest revenue.

Question 20

On February 1,2016,Pearson Corporation became the lessee of equipment under a five-year,noncancelable lease.The estimated economic life of the equipment is eight years.The fair value of the equipment was $600,000.The lease does not meet the definition of a capital lease in terms of a bargain purchase option,transfer of title,or the lease term.However,Pearson must classify this as a capital lease if the present value of the minimum lease payments is at least

Accepted Answer

A) $600,000. 
B) $540,000. 
C) $450,000. 
D) $405,000. 
A) $600,000. 
B) $540,000. 
C) $450,000. 
D) $405,000.

Recording a sales-type lease is similar to recording:

What is the effective annual interest rate charged to Reagan on this lease?

If the lessee expects to obtain title to leased property due to a bargain purchase option or passage of title at the end of the lease term:

Discuss the financial statement disclosure requirements for all leases entered into by the lessee.

Matt Co.is the lessor in connection with a Type B lease.Under the new ASU,Matt Co.would record:

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.

If the lessor retains title to leased property under the terms of the lease:

S Corp.has a rate of return on assets of 10% and a debt/equity ratio of 2 to 1.Not including any indirect effects on earnings,the immediate impact of recording a capital lease on these ratios is a(an):

What is a bargain purchase option and when do the parties to a lease know if it exists?

What is the net book value of the lease liability in Lone Star's June 30,2016,balance sheet? Round your answer to the nearest dollar.

A guaranteed residual value at the inception of a capital lease should be:

When the total expenses over the life of an operating lease are compared to the total expenses over the life of a capital lease,one will find that:

From the perspective of the lessee,leases may be classified as either:

In a lease transaction,what are initial direct costs? How do we account for initial direct costs in an operating lease,a direct financing lease,and a sales-type lease?

The four criteria provided in GAAP for distinguishing a capital lease from an operating lease do not include:

At what amount would Reagan record the leased asset at inception of the agreement?

Barr Corp.is the lessee in a Type A lease.Under the new ASU,Barr would record:

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

Recording a sales-type lease is similar to recording:

What is the effective annual interest rate charged to Reagan on this lease?

If the lessee expects to obtain title to leased property due to a bargain purchase option or passage of title at the end of the lease term:

Discuss the financial statement disclosure requirements for all leases entered into by the lessee.

Matt Co.is the lessor in connection with a Type B lease.Under the new ASU,Matt Co.would record:

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.

If the lessor retains title to leased property under the terms of the lease:

S Corp.has a rate of return on assets of 10% and a debt/equity ratio of 2 to 1.Not including any indirect effects on earnings,the immediate impact of recording a capital lease on these ratios is a(an):

What is a bargain purchase option and when do the parties to a lease know if it exists?

What is the net book value of the lease liability in Lone Star's June 30,2016,balance sheet? Round your answer to the nearest dollar.

A guaranteed residual value at the inception of a capital lease should be:

When the total expenses over the life of an operating lease are compared to the total expenses over the life of a capital lease,one will find that:

From the perspective of the lessee,leases may be classified as either:

In a lease transaction,what are initial direct costs? How do we account for initial direct costs in an operating lease,a direct financing lease,and a sales-type lease?

The four criteria provided in GAAP for distinguishing a capital lease from an operating lease do not include:

At what amount would Reagan record the leased asset at inception of the agreement?

Barr Corp.is the lessee in a Type A lease.Under the new ASU,Barr would record:

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