If there is a reasonable certainly that lessee will obtain ownership by the end of the lease term, the depreciation of the leased asset is based on the Useful life of the asset or lease term, whichever is longer Useful life of the asset or lease term, whichever is shorter Useful life of the asset Lease term

If there is a reasonable certainly that lessee will obtain ownership by the end of the lease term, the depreciation of the leased asset is based on the Useful life of the asset or lease term, whichever is longer Useful life of the asset or lease term, whichever is shorter Useful life of the asset Lease term

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

Chapter11: Notes, Bonds, And Leases

Section: Chapter Questions

Problem 12Q

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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 liability
Use the following information to decide whether this equipment lease qualifies as an operating, sales-type, or direct financing lease to a lessor. a. There is no transfer of ownership at the end of the lease term. There is no bargain purchase option. The lease term is 60% of the economic life of the leased property. The present value of lease payments, including a residual value guaranteed by the lessee, is 100% of the fair value of the leased property to the lessor. The collectability of the lease payments is reasonably assured. The leased asset was not of a specialized nature. b. Same as (a), except that the residual value is guaranteed by a third party, not the lessee. The present value of the residual value guarantee is 15% of the fair value of the leased property. c. Same as (a), except that: the present value of the lease payments, including a residual value guaranteed by the lessee, is only 50% of the fair value of the leased asset. The collectability of the minimum lease payments is not predictable.
When a lease transfers ownership to the lessee by the end of the lease term, the underlying asset is depreciated A. Over the useful life of the asset B. Over the lease term C. Over the useful life of the asset or lease term whichever is shorter D. Not depreciated
For a lease that transfers ownership of the property to the lessee by the end of the lease term, the lessee should: a.amortize the right-of-use asset over the economic life of the asset in a manner consistent with the lessee's normal depreciation policy for owned assets b.amortize the right-of-use asset over the lease term in a manner consistent with the lessee's normal depreciation policy for owned assets c.record each lease payment as lease expense d.combine interest expense and amortization expense and report as a single lease expense
In calculating the amortization of a leased asset, the lessee should subtract a Select one: a. guaranteed residual value and amortize over the term of the lease. b. unguaranteed residual value and amortize over the term of the lease. c. guaranteed residual value and amortize over the life of the asset. d. unguaranteed residual value and amortize over the life of the asset. e. None of the above.
For a depreciable asset, the amount of depreciation recognised shall be in accordance with AASB 116. The asset shall be: a fully depreciated over the shorter of the lease term and its useful life, if there is a reasonable certainty that the lessee will obtain ownership by the end of the lease term. b fully depreciated over the shorter of the lease term and its useful life, if there is no reasonable certainty that the lessee will obtain ownership by the end of the lease term. c fully depreciated over the longer of the lease term and its useful life, if there is a reasonable certainty that the lessee will obtain ownership by the end of the lease term. d fully depreciated over the longer of the lease term and its useful life, if there is no reasonable certainty that the lessee will obtain ownership by the end of the lease term.
The residual value is the estimated fair value of theleased property at the end of the lease term.(a) Of what significance is (1) an unguaranteed and (2) aguaranteed residual value in the lessee’s accountingfor a capitalized-lease transaction?(b) Of what significance is (1) an unguaranteed and (2) aguaranteed residual value in the lessor’s accountingfor a direct-financing lease transaction?
Which of the following statements is/are not true? Interest expense on the lease liability will increase the carrying amount of the liability. A lessee shall measure the lease liability at the present value of the lease payments that are not paid at that date, using the lessee's incremental borrowing rate. Right-of-use asset cost will include an estimates cost to be incurred by the lessee in dismantling and removing the underlying asset, restoring the site on which it is located or restoring the underlying asset to the condition required by the terms and conditions of the lease. Group of answer choices Only statement 2. All statements are true. Only statements 2 and 3. None of the statements are true.
In computing amortization of a leased asset where there is no bargain purchase option, the lessee should subtract Question 3 options: a guaranteed residual value and depreciate over the life of the asset. no residual value and depreciate over the term of the lease. an unguaranteed residual value and depreciate over the term of the lease. an unguaranteed residual value and depreciate over the life of the asset.
When a lease modification results in partial termination of a lease, the change shall be accounted for as any of the following except: A. The increase in lease liability as a result of the lease modification is accounted for as an adjustment to the carrying amount of the right of use asset. B. The excess of the decrease in carrying amount of lease liability over the decrease in the carrying amount of the right of use asset is accounted for as a termination gain. C. The excess of the decrease in carrying amount of right of use asset over the decrease in the carrying amount of the lease liability is accounted for as a termination loss. D. The increase (decrease) in lease liability as a result of the lease modification is accounted for as termination loss (gain).
Which of the following statements about purchase option is correct? The lessee includes its present value on the computation of lease liability only if it is guaranteed. None of the other choices is correct. It is ignored if the leased asset reverts back to the lessor at the end of the useful life. Its present value is added to get the lease liability if it is reasonably certain that it will be exercised.
Occasionally, a lease agreement includes a guarantee by the lessee that the lessor will recover a specified residual value when custody of the asset reverts back to the lessor at the end of the lease term. Under what circumstance can the guaranteed residual value influence the amounts recorded by the lessee and lessor? In that circumstance, how are the amounts affected?