In computing the present value of the lease payments, the lessee should use the implicit rate of the lessor, assuming that the implicit rate is known to the lessee. use both its incremental borrowing rate and the implicit rate of the lessor, assuming that the implicit rate is known to the lessee. use its incremental borrowing rate in all cases. use the implicit rate in all cases.

In computing the present value of the lease payments, the lessee should use the implicit rate of the lessor, assuming that the implicit rate is known to the lessee. use both its incremental borrowing rate and the implicit rate of the lessor, assuming that the implicit rate is known to the lessee. use its incremental borrowing rate in all cases. use the implicit rate in all cases.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 2QTD

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Similar questions

When is it appropriate for the lessee to use the lessor's implicit rate to calculate the present value of the lease payments? A.when the lessee's incremental borrowing rate is lower than the lessor's rate B.whenever the lessee knows what the lessor's rate is C.when the lessor's implicit rate is lower than the lessee's incremental borrowing rate D.when the lessor's rate is higher than the lessee's incremental borrowing rate
Under IFRS, in computing the present value of the minimum lease payments, the lessee should:(a) use its incremental borrowing rate in all cases. (b) use either its incremental borrowing rate or the implicit rate of the lessor, whichever is higher, assuming that the implicit rate is known to the lessee. (c) use either its incremental borrowing rate or the implicit rate of the lessor, whichever is lower, assuming that the implicit rate is known to the lessee. (d) use the implicit rate of the lessor, unless it is impracticable to determine the implicit rate.
Can the present value of minimum lease payments differ between the lessor and lessee? If so, how?
4. How much is the gross investment that should be initially recognized as lease receivable?
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.
33 Gross investment in the lease is equal toA. the minimum lease payments receivable by the lessor.B. the unguaranteed residual value accruing to the lessor.C. both the minimum lease payments receivable by the lessor under a finance lease and the unguaranteed residual value accruing to the lessor.D. neither the minimum lease payments receivable by the lessor under a finance lease nor the unguaranteed residual value accruing to the lessor.
31 The interest rate implicit in the lease is the discount rate that causes the aggregate of the present value of the minimum lease payments and the unguaranteed residual value to be equal to theA. fair value of the leased asset.B. fair value of the leased asset and initial direct costs of the lessor.C. fair value of the leased asset and initial direct costs of the lessee.D. gross investment in the lease.
How is duration related to the interest elasticity of a fixed income security? What is the relationship between duration and the price of the fixed-income security? ( LG 22-3 )
12.Which of the following statements correctly describes the initial measurement of a lease liability by a lessee under IFRS? Select one: a. The cost of any bargain purchase option is included in the calculation of the lease liability b. The lease liability is discounted to its present value using the lessee’s incremental borrowing rate c. Guaranteed and unguaranteed residual values are included in the calculation of the lease liability at initial measurement d. All variable lease payments are included in the calculation of the lease liability at initial measurement
30. The amount to be recorded as the cost of an asset under a finance lease is equal to the present value of the lease payments plus the present value of any unguaranteed residual value. carrying value of the asset on the lessor's books. present value of the lease payments. present value of the lease payments or the fair value of the asset, whichever is lower.
How is duration related to the interest elasticity of a fixed-income security? What is the relationship between duration and the price of the fixed-income security?
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.