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

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

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 6MC: In the third year of a 6-year finance lease, the portion of the lease payment applicable to the...

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In the third year of a 6-year finance lease, the portion of the lease payment applicable to the reduction of the lease liability should be: a. less than in the second year b. more than in the second year c. the same as in the fourth year d. more than in the fourth year
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.
18. Which of the following lease conditions would result in a finance lease to the lessee? a.The fair market value of the property at the inception of the lease is $18,000; the present value of the minimum lease payments is $16,000. b.The lease term is 70% of the property's economic life. c.The lessee will return the property to the lessor at the end of the lease term. d.The lessee can purchase the property for $1 at the end of the lease term.
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.
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.
One of the determinative criteria for a finance lease specifies that the lease term be equal to or greater than a. 75% of the economic life of the leased asset b. 50% of the economic life of the leased asset c. the economic life of the leased asset d. 90% of the economic life of the leased asset
11. Which of the following is an appropriate journal entry for the initial recognition by a lessee of a finance lease arrangement? Select one: a.DRLeased assetCRBank loan b. DRCashCRLeased asset c. DRLeased liabilityCRLeased asset d. DRLeased assetCRLease liability 12. The following lease details relate to a finance lease arrangement between Crebarn (the lessor) and Balwane (the lessee). The lease term is 3 years; 3 lease payments of $60,000 each are to be made annually in advance; a guaranteed residual of $40,000 is payable at the end of the lease term; the implicit interest rate is 13%. The present value of the lease liability is: Select one: a. $180,000. b. $187,808; c. $220,000; d. $191,400; 13. The following information relates to a lease between Canneries Limited (lessor) and Fruiterers Limited (lessee). 3 lease payments of $20,000 each are made annually in advance and a final lease payment of $15,000 is made at the end of the 3 year lease term. The implicit interest rate…
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 property
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.
34. A lessee with a finance lease containing a bargain purchase option should depreciate the leased asset over the life of the asset or the term of the lease, whichever is shorter. life of the asset or the term of the lease, whichever is longer. asset's remaining economic life. term of the lease.
41. The basic difference between a direct-financing lease and a sales-type lease is the allocation of initial direct costs by the lessor to periods benefited by the lease arrangements. recognition of the profit on the sale. amount of the depreciation recorded each year by the lessor. manner in which rental receipts are recorded as rental income.
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.