All of the following would normally lead to a finance lease, except
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- At its inception, the lease term of Lease G is 65% of the estimated remaining economic life of the leased property. This lease contains a purchase option that is reasonably expected to be exercised. The lessee should record Lease G as: a. neither an asset nor a liability b. an asset but not a liability c. an expense d. an asset and a liabilityWhich of the following statements regarding the new accounting rules, which take effect in 2019, for leases is false? If the lease term is one year or longer, a liability must be recognized. If the lease term is less than one year, an asset must be recognized. The new lease accounting rules will result in more assets and liabilities being recognized on the balance sheet. Leasing will likely remain popular under the new lease accounting rules because leases do not require a large initial outlay of cash.For which of the following conditions will the lessor classify a lease as a sales-type lease? a.The leased asset may be exchanged for a similar asset during the lease term. b.The present value of the sum of the lease payments is equal to or more than the fair value of the underlying asset. c.The lease term is less than one year. d.The lease term is half of the underlying asset’s economic life.
- For which of the following conditions will the lessor classify a lease as a sales-type lease? A. The present value of the sum of the lease payments is equal to or more than the fair value of the underlying asset. B. The lease term is half of the underlying asset's economic life. C.The lease term is less than one year. D. The leased asset may be exchanged for a similar asset during the lease term.Which of the following is not one of the criteria for determining whether a lease is a finance lease? A. The asset cost is greater than $100,000B. The lease grants the lessee an option to purchase the asset that the lessee is reasonably certain to exerciseC. The lease term is for the major part of the remaining economic life of the assetD. Alease that transdies ownership of the asset to the lessee by the end of the lease termThe situation which would normally lead to a lease being classified as afinance lease include all of the following, except A. The lease transfers ownership of the underlying asset to the lessee at the end of the lease term. B. The lessee has the option to purchase the asset at a price which is expected to be sufficiently higher than the fair value at the date the option becomes exercisable. C. The lease term is for the major part of the economic life of the underlying asset even if title is not transferred. D. The present value of the lease payments amounts to substantially all of the fair value of the underlying asset at the inception of the lease.
- Which one of the following would normally lead to a lease being classified as an operating lease? a. The lease term is for a period of more than half of the expected economic life of the underlying asset. b. At the inception date of the lease agreement, the present value of the total lease payments is for an amount substantially less than the fair value of the underlying asset. c. The lease is cancellable, and all losses associated with the cancellation will be incurred by the lessee. d. It is reasonably certain at the inception date that the lessee will exercise an option to purchase the underlying asset at the end of the lease term for a price substantially lower than its expected fair value.Which of the following lease provisions would cause a lease to be classified as an operating lease? Select one: A. The collectability of lease payments by the lessor is unpredictable B. The lease contains a bargain purchase option C. The term of the lease is more than 75 percent of the estimated economic life of the leased property D. The present value of the minimum lease payments equals or exceeds 90 percent of the fair value of the leased propertyWhich of the following is a criterion for classifying a lease for a lessee as a finance lease? The lease term is for a major part of the asset’s economic life. The lease transfers ownership of the asset to the lessee at the end of the lease term. The present value of the lease payments equals or exceeds substantially the asset’s fair value. All of the above.
- On the lessor’s accounting, which of the following situations would prima facie lead to a lease contract being classified as an operating lease? Lease term is for a major part of the asset’s useful life Existence of a bargain purchase option Present value of minimum lease payments is 50% of the fair value of the leased asset Transfer of ownership by end of lease termA 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.A lease agreement will qualify as a finance lease if one of these conditionsoccur: A. The lessee returns the leased property to the lessor at the end of the lease term.B. The lease does not have a bargain purchase option.C. The lease term is for major of the economic life of the asset.D. The present value of the minimum lease payment amounts to substantially less than the fair value of the leased asset.
