3. For a finance lease, the leaseobligation of the lessee wouldbe reduced periodically bya. the lease payment less theportion allocable to interest.b. the lease payment plus theinterest expense for the period.c. the lease payment lessdepreciation expense if the lesseerecords depreciation.d. the lease payment less theamortization if the initial leaseliability is more than the faceamount, or plus the amortization ifthe initial lease liability is less thanthe face amount.e. none of the above.4. Initial direct costs incurredby the lessor in connection withspecific leasing activities as innegotiating and securingleasing arrangements in adirect finance lease would *a. result to an increase of theimplicit interest rate.b. result to a decrease of theimplicit interest rate.c. result to either an increase or adecrease of the implicit interest ratedepending on the given facts.d. be ignored if the lease qualifiesas a dealer's lease.

SOLUTION- FINANCE LEASE INVOLVES TRANSFER OF RISK AND REWARDS , THE LEASED ASSETS IS RECORDED IN…

3. For a finance lease, the lease obligation of the lessee would be reduced periodically by * a. the lease payment less the portion allocable to interest. b. the lease payment plus the interest expense for the period. c. the lease payment less depreciation expense if the lessee records depreciation. d. the lease payment less the amortization if the initial lease liability is more than the face amount, or plus the amortization if the initial lease liability is less than the face amount. O e. none of the above. 4. Initial direct costs incurred by the lessor in connection with specific leasing activities as in negotiating and securing leasing arrangements in a direct finance lease would * a. result to an increase of the implicit interest rate. b. result to a decrease of the implicit interest rate. c. result to either an increase or a decrease of the implicit interest rate depending on the given facts. d. be ignored if the lease qualifies as a dealer's lease.

3. For a finance lease, the lease obligation of the lessee would be reduced periodically by * a. the lease payment less the portion allocable to interest. b. the lease payment plus the interest expense for the period. c. the lease payment less depreciation expense if the lessee records depreciation. d. the lease payment less the amortization if the initial lease liability is more than the face amount, or plus the amortization if the initial lease liability is less than the face amount. O e. none of the above. 4. Initial direct costs incurred by the lessor in connection with specific leasing activities as in negotiating and securing leasing arrangements in a direct finance lease would * a. result to an increase of the implicit interest rate. b. result to a decrease of the implicit interest rate. c. result to either an increase or a decrease of the implicit interest rate depending on the given facts. d. be ignored if the lease qualifies as a dealer's lease.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The carrying amount of the finance lease liability from the capitalization of a lease would be periodically reduced by? Depreciation of the asset Total lease payments Potion of the lease payment allocable to the interest Portion of the lease payment allocable to reduction of the lease liability
Which of the following is not included in the lease payments for the purpose of computing the lease liability? A. Fixed payments less any lease incentives receivable B. Variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date C. Guaranteed residual value D. Contingent rent based on level of sales
The carrying amount of the finance lease liability from the capitalization of a lease would be periodically reduced by a. Potion of the lease payment allocable to the interest b. Portion of the lease payment allocable to reduction of the lease liability c. Total lease payments d. Depreciation of the asset
A lessor with a sales-type lease involving an unguaranteed residual value 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? The sales price less the present value of the residual value. The lease payments plus the unguaranteed residual value. The cost of the asset to the lessor, less the present value of any unguaranteed residual value. The present value of the lease payments plus the present value of the unguaranteed residual value.
For a direct-financing lease, the gross investment of the lessor is equal to the a. Present value of the minimum lease payments minus the unguaranteed residual value accruing to the lessor at the end of the lease term. b. Lower of 90% of the present value of the minimum lease payments or the fair value of the leased asset. c. Difference between the fair value of the leased asset and the deferred interest revenue. d. Minimum lease payments plus the unguaranteed residual value accruing to the lessor at the end of the lease term.
In an operating lease, when the annual lease payment is greater than the straight-line amortization of annual lease payments accruing to the lessor, there is? Group of answer choices None of these Prepaid rent expense Rent payable Additional rent expense
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…
On the balance sheet, the lease liability is measured as ________. Group of answer choices the present value of the lease payments less the present value of the guaranteed residual value (if any) the present value of the lease payments plus the future value of the guaranteed residual value (if any) the present value of the lease payments plus the present value of the guaranteed residual value if the lessee guarantees it(if any) the future value of the lease payments plus the future value of the guaranteed residual value (if any)
Compared to using a fi nance lease, a lessee that makes use of an operating lease will mostlikely report higher:A . debt.B . rent expense.C . cash fl ow from operating activity.
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.
Each period of a finance lease, the lessee records a lease expense that includes which of the following? Group of answer choices Interest expense on the lease liability, using the effective interest rate method and the discount rate it used to compute the present value of the liability at the lease commencement date; variable lease payments not included in the lease liability in the period in which the obligation for the variable payments is incurred; and changes in variable lease payments that depend on an index or rate. Neither A nor B is correct. Interest expense on the lease liability, using the effective interest rate method and the discount rate it used to compute the present value of the liability at the lease commencement date; variable lease payments not included in the lease liability in the period in which the obligation for the variable payments is incurred. Both A & B are correct.
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.