5. Which of the following statements is true in finance leases, from the viewpoint of the lessor regarding residual values? a. Guaranteed residual values are included in the gross investment amount, but unguaranteed residual values are excluded from the gross investment. b. Guaranteed residual values are excluded from the gross investment amount, but unguaranteed residual values are included in the gross investment. c. Guaranteed and unguaranteed residual values are both included in the gross investment amount. d. Guaranteed and unguaranteed residual values are both excluded from the gross investment amount

5. Which of the following statements is true in finance leases, from the viewpoint of the lessor regarding residual values? a. Guaranteed residual values are included in the gross investment amount, but unguaranteed residual values are excluded from the gross investment. b. Guaranteed residual values are excluded from the gross investment amount, but unguaranteed residual values are included in the gross investment. c. Guaranteed and unguaranteed residual values are both included in the gross investment amount. d. Guaranteed and unguaranteed residual values are both excluded from the gross investment amount

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

Chapter11: Notes, Bonds, And Leases

Section: Chapter Questions

Problem 11Q

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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 lessor recognizes a loss on finance lease when the fair value of the leased asset is _______ than the _________ residual value. A)higher; guaranteed B)lower; guaranteed C)lower; unguaranteed D)higher; unguaranteed
The lessor recognizes a loss on finance lease when the fair value of the leased asset is _______ than the _________ residual value. lower; guaranteed lower; unguaranteed higher; guaranteed higher; unguaranteed
The lessee recognizes a loss on finance lease when the fair value of the leased asset is _______ than the _________ residual value. higher; unguaranteed higher; guaranteed lower; guaranteed lower; unguaranteed
A key difference between a capital lease and an operating lease is that with a capital lease, the lease payments provide the lessor with a return of the funds invested in the asset plus a return on the invested funds, whereas with an operating lease the lessor depends on the residual value to realize a full return of and on the investment. True or false explain
28 Which one of the following is a correct statement of one of the indicators of a finance lease?A. The lease transfers ownership of the property to the lessor.B. The lease contains a purchase option.C. The lease term is for the major part of the economic life of the leased property.D. The minimum lease payments (excluding executory costs) equals or exceeds 90% of the fair value of the leased property.
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.
See attached picture A) What is the theoretical basis for the accounting standard that requires certain long-term leases to be capitalized by the lessee? Do not discuss the specific criteria for classifying a specific lease as a capital lease.
In Note 4, “Summary of accounting policies,” part 4.14, “Leases,” AF states that“leases are classified as finance leases when the lease arrangement transferssubstantially all the risks and rewards of ownership to the lessee.” Is this the policycompanies using U.S. GAAP follow?
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.
Which of the following statements regarding the calculation of the lessee's amortization expense for a finance lease is true? A. The guaranteed residual value is included in the measurement of the right-of-use asset to be amortized only to the extent that is likely to be owed. B. The guaranteed residual value is not included in the measurement of the right-of-use asset to be amortized. C. The unguaranteed residual value is included in the measurement of the right-of-use asset to be amortized. D. The bargain purchase option price is never included in the measurement of the right-of-use asset to be amortized.
In finance lease, the amount recorded as asset is the lower amount between: a. the fair value and the present value of the maximum lease payments b. the fair value of the asset and present value of the minimum lease payments c. the fair value and present value of the asset being leased d. the fair value of the minimum lease payments and present value of the asset