A finance lease situation is most likely when the lease term is equal to or greater than Select one: a. 75% of the expected economic life of the leased asset. b. 90% of the expected economic life of the leased asset. c. 50% of the expected economic life of the leased asset. d. 80% of the expected economic life of the leased asset.

A finance lease situation is most likely when the lease term is equal to or greater than Select one: a. 75% of the expected economic life of the leased asset. b. 90% of the expected economic life of the leased asset. c. 50% of the expected economic life of the leased asset. d. 80% of the expected economic life of the leased asset.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter20: Accounting For Leases

Section: Chapter Questions

Problem 8MC: At its inception, the lease term of Lease G is 65% of the estimated remaining economic life of the...

See similar textbooks

Similar questions

23. One of the four general criteria for a capital lease is that the present value at the beginning of the lease term of the minimum lease payments equals or exceeds a. the property's fair market value. b. 90 percent of the property's fair market value. c. 75 percent of the property's fair market value. d. 50 percent of the property's fair market value.
indicate whether the company has entered into a finance lease oran operating lease. The present value of the lease payments is 95% of the leased asset’s market value, and the lease term is 90% of the leased asset’s useful life.
A active lease involves obligations that are not evenly distributed over the lease period. That the very first year's rent is $14,000, with a total payment of $120,000 throughout the four lease period. Interest expenditure for the first year is $6,000, relating to the current value of the entire lease payments and the implicit interest rate. For the first year, the right-to-use asset should be amortised as follows: Multiple-choice questions $0 $8,000 $20,000 $24,000
Each of the three independent situations below describes a finance lease in which annual lease payments are payable at the end of each year. The lessee is aware of the lessor’s implicit rate of return. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Situation 1 2 3 Lease term (years) 12 20 3 Lessor's rate of return (known by lessee) 10% 8% 11% Lessee's incremental borrowing rate 11% 9% 10% Fair value of lease asset $650,000 $1,005,000 $210,000 Required:a. & b. Determine the amount of the annual lease payments as calculated by the lessor and the amount the lessee would record as a right-of-use asset and a lease liability, for each of the above situations. (Round your answers to the nearest whole dollar.)
The Harris Company is the lessee on a four-year lease with the following payments at the end of each year: Year 1: $ 18,500 Year 2: $ 23,500 Year 3: $ 28,500 Year 4: $ 33,500 An appropriate discount rate is 7 percentage, yielding a present value of $86,637. b-1. If the lease is a finance lease, what will be the initial value of the right-of-use asset? b-2. If the lease is a finance lease, what will be the initial value of the lease liability? b-3. If the lease is a finance lease, what will be the lease expense shown on the income statement at the end of year 1? (Leave no cells blank – be certain to enter “0” wherever required.) b-4. If the lease is a finance lease, what will be the interest expense shown on the income statement at the end of year 1? (Round your answer to the nearest dollar amount.) b-5. If the lease is a finance lease, what will be the amortization expense shown on the income statement at the end of year 1? (Round your answer to…
When there is an ungaranteed residual values of $35,000 and the lessee estimates that the asset returned at the end of the lease terms is $25,000. I=6 N=48, PMT=1360 how do i calculated the present value with the ungaranteed value?
The interest expense of the lessee during the year when payment is made in advanced shall be: O Lease liability at inception of the lease multiplied by implicit rate of interest. O Total present value of lease liability after initial payment multiplied by effective rate of interest. O Cost of ROUA plus PV of restoration cost multiplied by implicit rate of interest. O Annul lease payment divided by implicit rate of interest multiplied by effective rate.
Each of the four independent situations below describes a finance lease in which annual lease payments are payable at the beginning of each year. The lessee is aware of the lessor’s implicit rate of return. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Situation 1 2 3 4 Lease term (years) 5 8 6 9 Lessor's rate of return 10% 11% 9% 12% Fair value of lease asset $ 59,000 $ 359,000 $ 84,000 $ 474,000 Lessor's cost of lease asset $ 59,000 $ 359,000 $ 54,000 $ 474,000 Residual value: Estimated fair value 0 $ 59,000 $ 16,000 $ 32,000 Guaranteed fair value 0 0 $ 16,000 $ 37,000 Required: a. & b. Determine the amount of the annual lease payments as calculated by the lessor and the amount the lessee would record as a right-of-use asset and a lease liability, for each of the above situations.
Each of the four independent situations below describes a finance lease in which annual lease payments are payable at the beginning of each year. The lessee is aware of the lessor’s implicit rate of return. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Situation 1 2 3 4 Lease term (years) 5 8 6 9 Lessor's rate of return 10% 11% 9% 12% Fair value of lease asset $ 65,000 $ 365,000 $ 90,000 $ 480,000 Lessor's cost of lease asset $ 65,000 $ 365,000 $ 60,000 $ 480,000 Residual value: Estimated fair value 0 $ 65,000 $ 22,000 $ 34,000 Guaranteed fair value 0 0 $ 22,000 $ 39,000 Required: a. & b. Determine the amount of the annual lease payments as calculated by the lessor and the amount the lessee would record as a right-of-use asset and a lease liability, for each of the above situations. Note: Round your answers to the nearest whole dollar amount. I have got all answers except…
Each of the four independent situations below describes a finance lease in which annual lease payments are payable at the beginning of each year. The lessee is aware of the lessor’s implicit rate of return. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Situation 1 2 3 4 Lease term (years) 5 8 6 9 Lessor's rate of return 9% 10% 8% 11% Fair value of lease asset $ 69,000 $ 369,000 $ 94,000 $ 484,000 Lessor's cost of lease asset $ 69,000 $ 369,000 $ 64,000 $ 484,000 Residual value: Estimated fair value 0 $ 69,000 $ 26,000 $ 38,000 Guaranteed fair value 0 0 $ 26,000 $ 43,000
This active lease has installments that are not evenly distributed over the lease period. That the very first year's rent is $14,000, with a total payment of $120,000 throughout the five-year lease period. Interest expenditure for the first year is $6,000, based on the present value of the entire lease payments and the implicit interest rate. For the first year, the right-to-use asset should be amortised as follows: $0 $8,000 $20,000 $24,000
Explain which of following would result in the lessee classifying the lease as a finance lease. a. The lease is for a major part of the economic life of the asset. b. The lease term is for 12 months or less. c. The lease transfers ownership of the asset at the end of the lease.