A lease that transfers the benefits and risks of ownership should be capitalized.
Minimum lease payments do not include the guaranteed residual value.
Financial statement or note disclosure is required for all operating leases that have a non-cancelable term in excess of one year.
If a lease contains a dealer's profit, it is classified as a direct financing lease for the lessor.
A lease that is cancelable cannot be recorded as a capital lease.
A lease where the present value of the minimum lease payments exceed 80% of the fair value of the asset must be capitalized.
Executory costs do represent payment on or reduction of the lease obligation.
The present value of the unguaranteed residual value is included in the calculation of the minium lease payments for the lessee.
For a capital lease with a bargain purchase option, the lessee should depreciate the capitalized asset based on the lease term as opposed to the economic life of the asset.
Under the operating lease method, the lessee will depreciate the asset over the lease term if less than the economic life of the asset.
Which of the following are not includable in executory costs?
B. minimum rental payments
Which of the following is not a criterion for a lease to be recorded as a capital lease?
B. the lease is cancelable
Which of the following is included in the minimum lease payment?
C. bargain purchase option
The lessee computes the present value of the minimum lease payments using the lessee's:
D. incremental borrowing rate
The lessee may not capitalize property for more than its:
C. fair value
Which of the following is not a benefit to the lessor?
A. off-balance sheet financing.
Which of the following is not one of the classifications for leases from the lessor's viewpoint?
C. off-balance sheet
The distinction for the lessor between a direct financing lease or a sale-type lease is the presence or absence of:
B. manufacturer or dealer's profit
Any lease that does not qualify as a direct financing lease or a sales-type lease is classified and accounted for by the lessor as a(n):
A. operating lease
When depreciable asset is leased under an operating lease, the lessor:
A. records depreciation in the normal manner
All of the following are advantages of leasing except
A. . elimination of the risk of obsolescence
The FASB agrees with which of the following viewpoints regarding capitalization of leases?
B. capitalize those leases similar to installment purchases
The lessee would classify a lease as a capital lease if the
C. lease term is equal to 75% or more of the economic life of the leased asset
Minimum lease payments include all of the following except
A. executory costs
The lessee records a capital lease as an asset and a liability at the
D. lower of the present value of the minimum lease payments or the fair market value of the leased asset
All of the following are difference that occur if a lease is classified as a capital lease instead of an operating lease except:
D. a decrease in the amount of total expenses
A lease that involves a manufacturer's or dealer's profit is a(n)
A. sales-type lease
Unearned interest revenue is
A. amortized to revenue over the lease term by using the effective interest method
Lease payments recievable includes all of the following except
B. all of the options are included
In computing lease payments, the amount to be recovered by the lessor is the
C. fair market value of the leased asset less the present value of the asset's residual value
The computation of the lessee's capitalized amount is the sum of the
B. present value of the annual rental payments and the present value of the guaranteed residual value
The lessor includes the leased asset's residual value in the amount to be recovered through lease payments if the residual value is
B. guaranteed or unguaranteed
Which one of the following amounts would differ in a sales-type lease with an unguaranteed residual value instead of a guaranteed residual value?
C. sales price of the asset
The lessor expenses initial direct costs in the year of incurrence in a(n)
C. sales-type lease
All of the following are disclosures required of the lessor except
A. all of the options are required disclosures
Which of the following is an advantage of leasing?
B. all of these
Which of the following best describes current practice in accounting for leases?
A. leases similar to installment purchases are capitalized
What impact does a bargain purchase option have on the present value of the minimum lease payments computed by the lessee?
D. the lessee must increase the present value of the minimum lease payments by the present value of the option price
The amount to be recorded as the cost of the asset under capital lease is equal to the
B. present value of the minimum lease payments or the fair value of the asset, whichever is lower
The methods of accounting for a lease by the lessee are
B. operating and capital lease methods
Minimum lease payments may include a
C. any of these
Executory costs include
D. all of these
In computing the present value of the minium lease payments, the lessee should
A. use either its incremental borrowing rate or the implicit rate of the
lessor, whichever is lower, assuming that the implicit rate is known to
In computing depreciatino of a leased asset, the lessee should subtract
A. a guaranteed residual value and depreciate over the term of the lease
In the earlier years of a lease, from the lessee's perspective, the use of the
A. capital method will cause debt to increase, compared to the operating method
A lessee with a capital lease containing a bargain purchase option should depreciate the leased asset over the
C. asset's remaining economic life
Based soley upon the following sets of circumstances indicated below, which set gives rise to a sales-type or direct-financing lease of a lessor?
I transfers ownership by end of lease
II contains bargain purchase option
III collectiblility of Lease payments assured
IV Any important uncertainties
B. I & IV no, II & III yes
In a lease that is appropriately recorded as a direct financing lease by the lessor, unearned income
D. should be amortized over the period of the lease using the interest method
In order to properly record a direct financning lease, the lessor needs to know how to calculate the lease recievable. The lease receivable in a direct financing lease is best defined as
B. the present value of minimum lease payments
If the residual value of a lease asset is guaranteed by a third party
D. it is treated by the lessee as an additonal payment and by the lessor as realized at the end of the lease term
The primary difference between a direct financing lease and a sales-type lease is the
C. recognition of the manufacturer's or dealer's profit at the inception of the lease
A lessor with a sales type lease involving an unguaranteed residual value available to the lessor at the end of the lease term will report sales revenue in the period of inception of the lease at which of the following amounts?
D. the present value of the minimum lease payments
The lease liability account should be disclosed as
D. current portions in current liabilities and the remainder in noncurrent liabilities
When a company sells property and then leases it back, any gain on the sale should usually be
C. deferred and recognized as income over the term of the lease
Major reasons why a company may become involved in leasing to other companies is (are)