Exam 8: Leases

Which of the following is not one of the situations provided in AASB 117 in relation to the classification of leases as finance leases?

Which of the following is included within the scope of AASB 117?

The journal entry recorded by the lessee when the payment is made at the end of the first year is:

Explain why 'cancellability' is regarded as an important condition in the classification of a leasing arrangement.

Nelson Ltd manufactures specialised machinery for both sale and lease.On 1 July 2012,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:

According to AASB 117 Leases,because lease payments are made over the lease term,the payments made under a finance lease must be divided into the following components: I II III IV -Reduction of the lease liability Yes Yes No Yes -Interest expense incurred Yes No Yes No -Reimbursement of lessor costs Yes Yes Yes No -Receipt of lease incentives No No Yes Yes

Which of the following is not an example of a risk of ownership of an asset?

Interpretation 4 Determining Whether an Arrangement Contains a Lease provides that the following arrangements which are not in the legal form of a lease may in fact fall within the definition of a lease for accounting purposes: I II III IV -Outsourcing arrangements Yes Yes No Yes -Non-cancellable service agreements Yes No Yes No -Service concession arrangements Yes Yes No Yes -Take-or-pay contracts No No Yes Yes

On inception date,the present value of the minimum lease payments is:

Under AASB 117 Leases,lessors are required to account for lease receipts from operating leases as:

With respect to operating leases,lessors are required under AASB 117 Leases,to make the following disclosures: I Total contingent rents recognised as income in the period. II Future minimum lease payments under individual,cancellable operating leases,separately. III A general description of the lessee's leasing arrangements. IV Future minimum lease payments under non-cancellable operating leases in aggregate.

AASB 117 deems cancellable leases with which of the following characteristics to be non-cancellable: I II III IV -Leases that can be cancelled upon the Occurrence of some remote contingency No Yes Yes Yes -Leases that can be cancelled only with The permission of the lessor Yes No Yes Yes -Leases where the lessee,upon Cancellation,is committed to enter into A further lease with the same lessor Yes Yes Yes No -Leases that require the lessee to pay a Substantial penalty on cancellation Yes Yes Yes No

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

In relation to finance leases,the following information must be disclosed separately in the financial statements of lessors: I Unearned finance income. II Contingent rents recognised as income in the period. III The unguaranteed residual values accruing to the benefit of the lessee. IV The accumulated allowance for uncollectible minimum lease payments receivable.

Entities normally enter into sale and leaseback arrangements to generate immediate cash flows.Discuss.

Explain what a lease is.

Which of the following statements is incorrect?

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

On 30 June 2012,Mala Ltd leased a vehicle to Tango Ltd.Mala Ltd had purchased the vehicle on that day for its fair value of $89 721.The lease agreement cost Mala Ltd $1 457 to have drawn up and requires Tango to reimburse Mala for annual insurance costs of $1 050.The amount recorded as a lease receivable by Mala Ltd at the inception of the lease is:

Timely Limited accepts a lease incentive to enter into a 4-year operating lease for equipment.The incentive is cash amounting to $10 000 that will be paid on the date the lease agreement is signed.On inception of the lease,the lessor will record: