. In a lease that is not classified as a manufacturer's lease, initial direct cost is a. added to the cost of the asset to get the gross investment in the lease. b. added to the cost of the liability to get the net investment in the lease. c. added to the cost of the liability to get the gross investment in the lease. d. added to the cost of the asset to get the net investment in the lease.
Q: Under an operating lease, the lessee recognizes a ____________ when the aggregate rental payments is…
A: Introduction: Operating lease: The ownership of the Asset cannot be transferred under operating…
Q: 1. In a lease that is recorded as a manufacturer's lease or dealer's lease by the lessor, interest…
A: “Since you have asked multiple question, we will solve the first question for you. If you want any…
Q: Answer True or False Initial direct costs are immediately recognized as an expense by the lessor…
A: Per Per PFRS 16 Inidial direct cost are the incremental cost of obtaining a lease that would not…
Q: 1. In a lease that is recorded as a manufacturer's lease or dealer's lease by the lessor, interest…
A: A lessor's interest income is the difference between the sum of the total rentals due to the lessor…
Q: Initial direct costs incurred by the lessor in connection with specific leasing activities as in…
A: Solution: Initial direct costs incurred by the lessor in connection with specific leasing activities…
Q: If the lease in a sale-leaseback transaction meets one of the five lease tests and is therefore…
A: The leaseback agreement includes the details regarding the lease duration, lease payment, etc.'
Q: 1. Which statement is incorrect about initial direct costs? a. Initial direct costs incurred by the…
A: Initial direct costs are incremental cost of a lease that would not have been incurred if lease has…
Q: A lessor with a sales-type lease involving an unguaranteed residual value at the end of the lease…
A: A contract under which lessee gets the right to use an asset by the lessor and pays him…
Q: When are initial direct costs recognized in an operating lease? In a sales-type lease with selling…
A: Initial direct cost paid by the lessee is added to the right-of-use asset. If incurred by the…
Q: For a direct-financing lease, the gross investment of the lessor is equal to the a. Present value of…
A:
Q: A lessor will record interest income if a lease is classifi ed as:A . a capital lease.B . an…
A: Introduction: Leasing is a mechanism by which the company may receive certain capital assets for…
Q: If a sale and leaseback transaction results in a finance lease, any excess of sale proceeds over the…
A: Solution A lease is a contract outlining the terms under which one party agrees to rent an asset -…
Q: When a lease modification results in partial termination of a lease, the change shall be accounted…
A: Answer is option D) The increase (decrease) in lease liability as a result of the lease modification…
Q: The residual value is the estimated fair value of the leased property at the end of the lease term.…
A: Finance lease is also known as capital lease.This is a long term lease agreement in which the lessee…
Q: In an operating lease, rent collected in advance by the lessor should be treated as? prepaid…
A: Introduction: Operating lease: Under the operating lease the owner ship of the Asset does not…
Q: a lease that is recorded as a manufacturer's lease or dealer's lease by the lessor, interest revenue…
A: Step 1 Vendor records are lease records (credit) and the corresponding debit of cash or rent…
Q: The appropriate valuation of an operating lease in the balance sheet of the lessee is? right of use…
A: The appropriate valuation of an operating lease in the balance sheet of the lessee is Nil.... Only…
Q: Which of the following is not correct statement for accounting by the lessee? O a. The lessee…
A: The incorrect Statement for accounting by lessee is "The operating lease method is used to account…
Q: A lessee should initially recognize a right-of-use asset at cost. This cost figure includes: The…
A: Right-of-use asset: It is the lessee's right to occupy, operate, or hold a leased asset during the…
Q: Which one of the following definitions is/are correct? I. A lease between a lessor and the…
A: 1) Incorrect: Direct lease is the lease between manufacture or dealer(which is lessor) and user…
Q: his type of lease involves recognition of a manufacturer’s or dealer’s profit or loss on the…
A: Step 1 In a sales-type lease, the lesser is assumed to be selling a product to the lessee, which…
Q: hen a lease transfers ownership to the lessee by the end of the lease term, the underlying asset is…
A: Solution: As per IAS 17, "If there is no reasonable certainty that the lessee will obtain ownership…
Q: The carrying amount of the right of use asset from the capitalization of a lease would be…
A: This question deals with the IFRS 16 "Leases" As per IFRS, When lessee takes asset on lease then he…
Q: Which one of the following would normally lead to a lease being classified as an operating lease?…
A: Solution: "At the inception date of the lease agreement, the present value of the total lease…
Q: In calculating the amortization of a leased asset, the lessee should subtract a Select one: a.…
A: Amortization- Amortization refers to spreading payments over manifold periods. The word is used for…
Q: Payments on an operating lease will appear: A. In the profit and loss account as an expense B. In…
A: Lease agreement is a type of agreement between two parties, in which one party provides its assets…
Q: Under a direct financing lease, the excess of aggregate rentals over the cost of the leased property…
A: Lease refers to the contract that outline the terms where one party of the contract agrees to rent…
Q: In a sale and leaseback transaction, what is used by the buyer-lessor to depreciate the cost of the…
A: In a sale and leaseback transaction, what is used by the buyer-lessor to depreciate the cost of the…
Q: In a lease that is not assified as a manufacturer's ase, initial direct cost is * a. added to the…
A: Solution: In a lease that is not classified as a manufacturer's lease, initial direct cost is "added…
Q: TRUE OR FALSE: in a sales type lease the net investment in the lease is credited to the appropriate…
A: Lease is a financial transaction where one party, the lessor leases his asset to another party…
Q: Which of the following statements characterizes a sales-type lease? A)The lessor recognizes only…
A: SOLUTION- SALES TYPE LEASE IS A FINANCE LEASE IN WHICH THE FAIR MARKET VALUE (OR IF LOWER , THE PV…
Q: Which of the following statements is/are not true? Interest expense on the lease liability will…
A: PFRS 16 talks about Recognition, Classification, Measurement and Disclosure of Leases in Financial…
Q: A lease that involves a manufacturer’s or dealer’s profit is a(an):(a) direct financing lease.(b)…
A: Lease: Lease is a contractual agreement whereby the right to use an asset for a particular period of…
Q: The lessee normally measures the lease liability to be recorded as the: Select one: a. Present…
A: Lease: Lease is a contractual agreement whereby the right to use an asset for a particular period of…
Q: When should a lessor recognize as income a nonrefundable lease bonus paid by a lessee on signing an…
A: Solution: The receipt of the lease bonus creates deferred revenue whether refundable or non…
Q: Net investment in a sales-type lease is equal to
A: Net investment in sales type lease is recognized by lessor as amount of lease receivable. Option (a)…
Q: Net investment in a sales-type lease is equal to Gross investment less unearned financing revenue…
A: Sales-type lease is a type of lease where the lessor is assumed to sell the property to lessee.…
Q: Which statement characterizes an operating lease? The lessor records depreciation and lease…
A: Solution: Following statement characterizes finance lease: The lessee records depreciation and…
Q: A lease qualifies as a finance (sales-type) lease. Indicate an account to be used by the lessee, and…
A: Accounting Entry Made by lessee Dr. Right of Use Assets Cr. Lease Liability Accounting…
Q: Which of the following lease-related revenue and expense items would be recorded by the lessor if…
A: A lessor is someone who rents or lease an asset without transferring the ownership rights. A lessee…
Q: What is the treatment of an unguaranteed residual value in determining the cost of sales under a…
A: Lease is an agreement between to two parties where one party provide plant and machinery to second…
Q: Initial direct costs incurred by the lessor under a sales-type lease should be a. Deferred and…
A: Initial direct cost refers to the cost that Related directly with the completing a lease…
Q: Under a direct financing lease, the excess of aggregate rentals over the cost of the leased property…
A: Solution: Under a direct financing lease, the excess of aggregate rentals over the cost of the…
Q: g lease, the lessor recognizes a ____________ when the cumulative rental income is lower than the…
A: An operating lease is a contract that allows you to use an asset without giving up ownership of it.…
Q: The initial direct costs incurred in relation to a lease transaction is added to get the right of…
A: The initial direct costs incurred in relation to a lease transaction is added to get the right of…
2. In a lease that is not classified as a manufacturer's lease, initial direct cost is
a. added to the cost of the asset to get the gross investment in the lease.
b. added to the cost of the liability to get the net investment in the lease.
c. added to the cost of the liability to get the gross investment in the lease.
d. added to the cost of the asset to get the net investment in the lease.
Step by step
Solved in 2 steps
- Which of the following statements is true about initial direct costs? A. Initial direct costs of a sales-type lease should be expensed at the commencement of the lease only if no selling profit or loss has been incurred. B. Initial direct costs are ownership-type costs such as insurance, maintenance, and taxes. C. Initial direct costs of an operating lease should be recorded by the lessor as a prepaid asset. D. Initial direct costs should always be debited against income by the lessor in the period of the inception of the lease.1. Which statement is incorrect about initial direct costs? a. Initial direct costs incurred by the lessee in finance lase are added to the amount recognized as an asset and to the finance lease liability. b. In a direct financing lease, initial direct costs are added to the net investment in the lease. c. In a sales type lease, initial direct costs are expensed as component of cost of goods sold. d. For operating leases, initial direct costs are deferred and allocated over the lease term. 2. If the lessor and lessee use different interest rates to account for a finance lease, then a. The lessor will use different account titles to record the leasing transactions b. Total expenses and revenues will be equal c. Total expenses and revenues will be different d. The lessee and the lessor cannot use different interest rates 3. In the case of a lease of land and building where title to the land is not transferred, the lease is generally treated as if: a. Both land and building are finance…The initial direct costs incurred in relation to a lease transaction is added to A)the cost of sales of lessee under a sales-type lease B)get the net investment for the lessor under a direct finance lease C)get the net investment for the lessor under a sales-type lease D)get the right of use asset for the lessor
- The initial direct costs incurred in relation to a lease transaction is added to get the right of use asset for the lessor get the net investment for the lessor under a sales-type lease the cost of sales of lessee under a sales-type lease get the net investment for the lessor under a direct finance leaseThe difference of gross investment in the lease and net investment in the lease of the lessor is? A. Total amount of interest that the lessee shall recognized as interest expense over the lease term. B. Interest income at inception of the lease. C. Total amount of interest that the lessor shall recognized as interest income over the lease term. D. Initial direct cost.The residual value is the estimated fair value of the leased property at the end of the lease term. a. Of what significance is (1) an unguaranteed and (2) a guaranteed residual value in the lessee's accounting for a finance lease transaction? b. Distinguish between lease payments used to determine lease classification compared to lease payments for measuring the lease liability.
- Answer True or False Initial direct costs are immediately recognized as an expense by the lessor when the cost incurred in conjunction with an operating lease. Both finance and operating leases are subject to capitalization. Under an operating lease, the lease bonus paid by the lessee to the lessor and amortized over the lease term as a reduction to lease income. When rental payments vary over the term of the operating lease, the lessor should recognize lease income on a straight-line basis, unless there is another method that is more appropriate Initial direct costs are immediately recognized as an expense by the lessor when the cost incurred in conjunction with an operating lease. The lessor uses the implicit interest rate in determining the present value of the lease payments Termination penalties are included in the lease payments if the lease term reflects the lessee exercising an option to terminate the lease. In a sale and leaseback transaction that qualifies as a sale under…Initial direct costs incurred by the lessor under a sales-type lease should be a. Deferred and allocated over the economic life of the leased property. b. Expensed in the period incurred. c. Deferred and allocated over the term of the lease in proportion to the recognition of rental income. d. Added to the gross investment in the lease and amortized over the term of the lease as a yield adjustment.Initially, a lease liability is measured a. by the lessee at the present value of the lease payments that are not paid at the commencement date of the lease. b. by the lessor at the present value of the total lease payments payable at the commencement date of the lease. c. by the lessor at the total cost of the right-of-use asset. d. by the lessee at the total cost of the right-of-use asset.
- For a(n) ________ lease, a lessor recognizes revenue on the sale and records the asset, ________ lease. It also removes the leased asset from its accounts and records the ________. Group of answer choices sales-type; net investment in lease–sales-type; cost of goods sold finance; gross investment in lease–sales-type; cost of goods sold operating; net investment in lease–sales-type; cost of goods sold sales-type; finance; revenueWhich of the following statements characterizes a sales-type lease? A)The lessor recognizes only interest revenue over the life of the asset.. B)The lessor recognizes only interest revenue over the lease term. C)The lessor recognizes a dealer profit at lease inception and interest revenue over the lease term. D)The lessor recognizes a dealer profit at lease inception and interest revenue over the useful life.1. Gross investment in the lease is equal to Present value of lease payments under a finance lease of the lessor and any unguaranteed residual value. Sum of the lease payments receivable by a lessor under a finance lease and any unguaranteed residual value accruing to the lessor The lease payments under a finance lease of the lessor Present value of the lease payments under a finance lease of the lessor.