Question 1

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

Question 2

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 3

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

Question 4

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.E) A) and D)
F) A) and C)

Question 5

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 6

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.E) B) and C)
F) None of the above

Question 7

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 8

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

Question 9

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 10

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.E) None of the above
F) A) and B)

Question 11

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

Accepted Answer

A)  4%.
B)  6%.
C)  8%.
D)  17%.E) B) and C)
F) None of the above

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.E) A) and D)
F) None of the above

Question 13

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

Question 14

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

Accepted Answer

The lessee must reveal numerous items of...

Question 15

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.E) None of the above
F) B) and C)

Question 16

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.E) None of the above
F) B) and D)

Question 17

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.E) None of the above
F) All of the above

Question 18

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.E) None of the above
F) B) and D)

Question 19

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.E) A) and D)
F) A) and C)

Question 20

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.E) A) and D)
F) All of the above

Exam 15: Leases

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

Correct Answer
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The lessee must reveal numerous items of...
View Answer

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):

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

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

Correct Answer
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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.

Correct Answer
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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.

Correct Answer
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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?

Correct Answer
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Any costs incurred by the lessor that ar...
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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:

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

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

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

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

Correct Answer
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A bargain purchase option gives the less...
View Answer

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:

Correct Answer
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Recording a sales-type lease is similar to recording:

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

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

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

Correct Answer
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Exam 15: Leases

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedThe lessee must reveal numerous items of...View AnswerShow Answer

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):

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedAny costs incurred by the lessor that ar...View AnswerShow Answer

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:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedA bargain purchase option gives the less...View AnswerShow Answer

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:

Correct AnswerverifiedShow Answer

Recording a sales-type lease is similar to recording:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

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Correct Answer
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Correct Answer
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Correct Answer
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The lessee must reveal numerous items of...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
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Correct Answer
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Any costs incurred by the lessor that ar...
View Answer

Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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A bargain purchase option gives the less...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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