Question 1

A lessee when accounting for a lease incentive received under an operating lease treats is as a:

Accepted Answer

A)  increase in rental income over the lease term; 
B)  increase in rental expense over the lease term; 
C)  reduction in rental expense over the lease term; 
D)  reduction in rental income over the lease term. 
A)  increase in rental income over the lease term; 
B)  increase in rental expense over the lease term; 
C)  reduction in rental expense over the lease term; 
D)  reduction in rental income over the lease term.

Question 2

A finance lease is an agreement between an owner of an asset and a user of that asset wherein the:

Accepted Answer

A)  legal title to property is transferred to the lessee when the first lease payment is made; 
B)  ownership passes to the lessor on inception date of the lease; 
C)  substantially all of the risks and benefits of ownership remain with the lessor; 
D)  usual risks and benefits of ownership are transferred to the user. 
A)  legal title to property is transferred to the lessee when the first lease payment is made; 
B)  ownership passes to the lessor on inception date of the lease; 
C)  substantially all of the risks and benefits of ownership remain with the lessor; 
D)  usual risks and benefits of ownership are transferred to the user.

Question 3

Which of the following was NOT a reason given by the IASB to remove the requirement to classify leases from any future accounting standard?

Accepted Answer

A)  All leases give rise to a right to use the leased item that meets the definition of an asset; a single conceptual model to account for all leases is preferable; 
B)  The removal of classification will result in a simpler accounting standard; 
C)  Removing the classification will result in inconsistencies in how the minimum lease payments are determined for classification purposes; 
D)  Removal of classification will result in similar transactions being accounted for in the same way. 
A)  All leases give rise to a right to use the leased item that meets the definition of an asset; a single conceptual model to account for all leases is preferable; 
B)  The removal of classification will result in a simpler accounting standard; 
C)  Removing the classification will result in inconsistencies in how the minimum lease payments are determined for classification purposes; 
D)  Removal of classification will result in similar transactions being accounted for in the same way.

Question 4

Nelson Ltd manufactures specialised machinery for both sale and lease. On 1 July 2016, Nelson leased a machine to Poggi Ltd. The machine cost Nelson Ltd €195 000 to manufacture, and its fair value at the inception of the lease was €212 515. The interest rate implicit in the lease is 10%, which is in line with current market rates. Under the terms of the lease, Poggi Ltd has guaranteed €25 000 of the asset's expected residual value of €37 000 at the end of the 5-year lease term. The debit to the sales revenue account in Nelson's books is:

Accepted Answer

A)  €187 548; 
B)  €195 000; 
C)  €205 063; 
D)  €212 515. 
A)  €187 548; 
B)  €195 000; 
C)  €205 063; 
D)  €212 515.

Question 5

The following information relates to questions 
Adam Limited and Davies Limited enter into a finance lease agreement with the following terms:

?	lease term is 3 years
?	estimated economic life of the leased asset is 6 years
?	3 × annual rental payments of £23 000 each payment is one year in arrears
?	residual value at the end of the lease term is not guaranteed by the lessee
?	interest rate implicit in the lease is 7%.

-The period over which the asset should be depreciated by the lessee is:

Accepted Answer

A)  3 years; 
B)  6 years; 
C)  the rate as determined by the tax authorities; 
D)  cannot be determined from the information provided. 
A)  3 years; 
B)  6 years; 
C)  the rate as determined by the tax authorities; 
D)  cannot be determined from the information provided.

A lessee when accounting for a lease incentive received under an operating lease treats is as a:

A finance lease is an agreement between an owner of an asset and a user of that asset wherein the:

Which of the following was NOT a reason given by the IASB to remove the requirement to classify leases from any future accounting standard?

The Iasb and Its Conceptual Framework

Owners Equity: Share Capital and Reserves

Fair Value Measurement

Revenue From Contracts With Customers

Provisions, Contingent Liabilities and Contingent Assets

Financial Instruments

Share-Based Payment

Inventories

Employee Benefits

Impairment of Assets

Financial Statement Presentation

Statement of Cash Flows

Operating Segments

Other Key Notes Disclosures

Consolidation: Controlled Entities

Consolidation: Wholly Owned Subsidiaries

Consolidation: Intragroup Transactions

Translation of the Financial Statements of Foreign Entities

Agriculture

Associates and Joint Ventures

Joint Arrangements

Revenue From Contracts With Customers

Financial Instruments

Financial Instruments

Share-Based Payment

Exploration for and Evaluation of Mineral Resources

Filters

Exam 10: Leases

A lessee when accounting for a lease incentive received under an operating lease treats is as a:

A finance lease is an agreement between an owner of an asset and a user of that asset wherein the:

Which of the following was NOT a reason given by the IASB to remove the requirement to classify leases from any future accounting standard?

The Iasb and Its Conceptual Framework

Owners Equity: Share Capital and Reserves

Fair Value Measurement

Revenue From Contracts With Customers

Provisions, Contingent Liabilities and Contingent Assets

Financial Instruments

Share-Based Payment

Inventories

Employee Benefits

Impairment of Assets

Financial Statement Presentation

Statement of Cash Flows

Operating Segments

Other Key Notes Disclosures

Consolidation: Controlled Entities

Consolidation: Wholly Owned Subsidiaries

Consolidation: Intragroup Transactions

Translation of the Financial Statements of Foreign Entities

Agriculture

Associates and Joint Ventures

Joint Arrangements

Revenue From Contracts With Customers

Financial Instruments

Financial Instruments

Share-Based Payment

Exploration for and Evaluation of Mineral Resources

Filters