Exam 15: Leases

What is meant by the term "minimum lease payments"?

When a capital lease is first recorded at the inception of the lease,the lessee typically debits:

Differentiate between guaranteed and unguaranteed residual value of leased property.Does the difference affect the lessor's accounting for the lease?

On January 1,2016,Packard Corporation leased equipment to Hewlitt Company.The lease term is eight years.The first payment of $450,000 was made on January 1,2016.Remaining payments are made on December 31 each year,beginning with December 31,2016.The equipment cost Packard Corporation $2,400,000.The present value of the minimum lease payments is $2,640,000.The lease is appropriately classified as a sales-type lease.Assuming the interest rate for this lease is 10%,what will be the balance reported as a liability by Hewlitt in the December 31,2017,balance sheet?

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 recorded as assets and amortized over the term of the lease in:

GAAP requires that some lease agreements be accounted for as purchases.The theoretical justification for this treatment is that a lease of this type:

The criterion of 75% of economic life for classifying a lease as a capital lease is consistent with the basic premise that most of the risks and rewards of ownership occur during the first 75% of an asset's life.

How do U.S.GAAP and International Financial Reporting Standards (IFRS)differ with respect to leases of land and buildings?

Discuss the economic advantages of leasing.

In its 2016 annual report to shareholders,Douglas-Roberts International Corporation disclosed the following: In 2016,the company entered into three sale-leaseback arrangements with various financial institutions.Under the first arrangement,truck cab assembly machinery with a net book value of $58 million was sold for $60 million and leased back under an eight-year operating lease agreement.Under the second arrangement,tooling and related engine manufacturing equipment with a net book value of $261 million was sold for $260 million and leased back under an 11.5-year operating lease agreement.The third arrangement consisted of additional engine manufacturing equipment with a net book value of $62 million that was sold for $65 million and leased back under a 10-year operating lease agreement.The gain on these transactions was deferred and is being amortized over the terms of the lease agreements. Discuss the most likely reasons for these three transactions,and explain the basis for the last sentence of the disclosure.

Damon is the lessee in connection with a Type A lease.Under the new ASU,Damon would not record:

The appropriate asset value reported in the balance sheet by the lessee for an operating lease is:

Since the lease payments under a lease agreement are normally paid at the beginning of each period,the appropriate compound interest table to be used to determine the amount at which the leased asset should be recorded is the:

Which of the following statements regarding guaranteed residual values is true for the lessee?

One of the four criteria for a capital lease specifies that the lease term be equal to or greater than:

Compare and contrast the way leases are classified between operating and finance (capital)leases under U.S.GAAP and IFRS.

On January 1,2016,Holbrook Company leased a building under a three-year operating lease.The annual rental payments are $68,000 on January 1,2016,the inception of the lease,and $50,000 January 1 of 2017 and 2018.Holbrook made structural modifications to the building costing $90,000 before occupying the building.The useful life of the building and the modifications is 30 years with no expected residual value. Required: Prepare the appropriate journal entries for Holbrook Company for 2016.Holbrook's fiscal year is the calendar year,and the company uses straight-line depreciation.

If the lessee and lessor use different interest rates to account for a capital lease,then:

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.

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.