Filters
Question type
Study Flashcards

When there is an unguaranteed residual value, the lessor includes the present value of the unguaranteed residual value in the lease receivable.

A) True
B) False

Correct Answer

verifed

verified

Initial direct costs are expensed at the inception of the lease in ________.


A) an operating lease
B) a direct-finance lease
C) a sales-type lease
D) a capital lease

E) B) and C)
F) A) and D)

Correct Answer

verifed

verified

Jackson Corporation leases equipment to Andrews Company for a five-year period. At the beginning of the lease, Jackson records sales revenue. The lease to Andrews must ________.


A) be a sales-type lease
B) be a direct-finance lease
C) have a bargain renewal option
D) be an operating lease

E) A) and B)
F) All of the above

Correct Answer

verifed

verified

Which of the following is a true statement regarding treatment of leases under GAAP and IFRS?


A) Under IFRS, capital leases are referred to as finance leases.
B) Both GAAP and IFRS use bright-line tests as criteria for classifying leases.
C) Both GAAP and IFRS use qualitative tests to classify leases.
D) Both GAAP and IFRS require a specific number of criteria to be satisfied in order to classify a lease as a capital lease.

E) B) and C)
F) A) and B)

Correct Answer

verifed

verified

At the end of a lease, if the actual residual value exceeds the residual value guaranteed by the lessee, ________.


A) the lessor must compensate the lessee for the difference
B) the lessee must compensate the lessor for the difference
C) the lessor has no obligation to compensate the lessee for the excess
D) the lessee will record miscellaneous income

E) C) and D)
F) B) and D)

Correct Answer

verifed

verified

What disclosures must a lessor include on its financial statements for all leases to which it has entered?

Correct Answer

verifed

verified

For capital leases, the lessor must prov...

View Answer

Discuss the economic advantages and disadvantages of leasing assets.

Correct Answer

verifed

verified

For the lessee, there are a number of ad...

View Answer

On January 1 of the current year, Fields Corporation leased a machine from Kilmer Company. The machine originally cost Kilmer $500,000. The lease is an operating lease that requires for five annual payments of $72,000 beginning on January 1 of the current year. Which of the following journal entries should Kilmer record on January 1 of the current year?


A)  Cash 72,0000 Lease Receivable72,000\begin{array}{lrr} \text { Cash } &72,0000\\ \text { Lease Receivable} &&72,000\\\end{array}

B)  Cash 72,00 Unearned Rent Revenue 72,000\begin{array}{lrr} \text { Cash } &72,00\\ \text { Unearned Rent Revenue } &&72,000\\\end{array}

C)  Cash72,000 Rent Revenue 72,000\begin{array}{lrr} \text { Cash} &72,000\\ \text { Rent Revenue } &&72,000\\\end{array}

D) Cash 72,000 Rent Expense 72,000\begin{array}{lrr} \text {Cash } &72,000\\ \text { Rent Expense } &&72,000\\\end{array}

E) A) and B)
F) B) and D)

Correct Answer

verifed

verified

Which of the following costs are excluded from a minimum lease payment?


A) a guaranteed residual value
B) a bargain purchase option
C) executory costs
D) a penalty for failure to renew the lease

E) A) and C)
F) A) and B)

Correct Answer

verifed

verified

What is a requirement for lease disclosures under IFRS?


A) IFRS requires disclosure of the fair value of all leased assets.
B) IFRS requires disclosure of future lease payments for each of the next five years.
C) IFRS requires that lessee companies disclose future lease payments for the first year, the total of years two through five, and the remaining aggregate payments.
D) IFRS requires disclosure of rent expense for the five-year period.

E) A) and C)
F) A) and B)

Correct Answer

verifed

verified

If the present value of the minimum lease payments is be greater than or equal to ________, the lessee will record the lease as a capital lease.


A) 75% of the cost of the asset
B) 75% of the fair market value of the asset
C) 90% of the cost of the asset
D) 90% of the fair market value of the asset

E) C) and D)
F) B) and C)

Correct Answer

verifed

verified

The cost of a leasehold improvement is depreciated over which of the following time periods?


A) the term of the lease
B) the life of the improvement
C) a time period determined by management
D) the shorter of the physical life of the asset or the lease term

E) C) and D)
F) A) and B)

Correct Answer

verifed

verified

Which of the following statements are correct regarding an operating lease?


A) The lessor records depreciation expense and lease revenue.
B) The lessee records the leased asset as a long-term asset.
C) The lessee receives title to the asset at the end of the lease.
D) The lessee records interest expense.

E) A) and C)
F) None of the above

Correct Answer

verifed

verified

In determining the present value of the minimum lease payments under U.S. GAAP, the discount rate used by the lessee is the lower of the lessor's implicit rate or the lessee's incremental borrowing rate.

A) True
B) False

Correct Answer

verifed

verified

Under some circumstances, the lessee does not record the leased asset and lease obligation on the balance sheet.

A) True
B) False

Correct Answer

verifed

verified

Superbyte Corporation sells photographic equipment. Superbyte leases equipment to Laguna Madre Company on January 1 of the current year. The cost to manufacture the equipment was $12 million. The lease agreement between SuperByte and Laguna Madre had the follow terms: 1. The lease is noncancellable. 2) The lease has no residual value or bargain purchase option. 3) The lease term is 8 years; payments are made semiannually. 4) Depreciation is recorded each December 31 using the straight-line approach. 5) The economic life of the equipment is 8 years. 6) The lessee's incremental borrowing rate and the implicit interest rate are both 12% annually. 7) The lease payments are $1,493,617 semiannually. The first payment is due at the inception of the lease; subsequent payments are made every July 1 and January 1. 8) The fair value of the equipment at the inception of the lease is $16,000,000. What is the interest revenue that SuperByte will report on this lease in its current year income statement?


A) $1,626,340
B) $1,703,372
C) $1,887,983
D) $1,822,028

E) C) and D)
F) B) and C)

Correct Answer

verifed

verified

When the lessor pays executory costs then shifts the costs to the lessor through higher rental payments, the executory costs are not included in the calculation of minimum rental payments.

A) True
B) False

Correct Answer

verifed

verified

Generally, the lease term is the duration of the non-cancellable portion of the lease plus any bargain renewal options.

A) True
B) False

Correct Answer

verifed

verified

A lease is classified as a capital lease if the lease term is at least 75% of the estimated life for the property.

A) True
B) False

Correct Answer

verifed

verified

A lessee's option to purchase a leased asset at a price that is substantially lower than the asset's fair value is referred to as a(n) ________.


A) bargain purchase option
B) guaranteed purchase option
C) early purchase option
D) residual purchase option

E) B) and C)
F) C) and D)

Correct Answer

verifed

verified

Showing 101 - 120 of 130

Related Exams

Exam 1

The Financial Reporting Environment

80 Questions

Exam 2

Financial Reporting Theory

186 Questions

Exam 3

Judgment and Applied Financial Accounting Research

144 Questions

Exam 4

Review of the Accounting Cycle

187 Questions

Exam 5

Statements of Net Income and Comprehensive Net Income

145 Questions

Exam 6

Statements of Financial Position and Cash Flows and the Annual Report

177 Questions

Exam 7

Accounting and the Time Value of Money

117 Questions

Exam 8

Revenue Recognition

164 Questions

Exam 8

Extenssion: Ol Revenue Recognition Previous Standard

110 Questions

Exam 9

Short-Term Operating Assets: Cash and Receivables

134 Questions

Exam 10

Short-Term Operating Assets: Inventory

135 Questions

Exam 11

Long-Term Operating Assets: Acquisition, Cost Allocation

168 Questions

Exam 12

Long-Term Operating Assets: Departures From Historical Cost

141 Questions

Exam 13

Operating Liabilities and Contingencies

108 Questions

Exam 14

Financing Liabilities

181 Questions

Exam 15

Accounting for Stockholders Equity

125 Questions

Exam 16

Investing Assets

179 Questions

Exam 17

Accounting for Income Taxes

146 Questions

Exam 18

Accounting for Leases

148 Questions

Exam 19

Accounting for Employee Compensation and Benefits

137 Questions

Exam 20

Earnings Per Share

102 Questions

Exam 21

Accounting Corrections and Error Analysis

106 Questions

Exam 22

The Statement of Cash Flows

134 Questions

Show Answer