The appropriate valuation of an operating lease on the statement of financial position of a lessee is A. Zero B. The absolute sum of the lease payments C. The present value of the sum of the lease payments discounted at an appropriate rate D. The market value of the asset at the date of the inception of the lease

The appropriate valuation of an operating lease on the statement of financial position of a lessee is A. Zero B. The absolute sum of the lease payments C. The present value of the sum of the lease payments discounted at an appropriate rate D. The market value of the asset at the date of the inception of the lease

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...

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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.
The lessee normally measures the lease liability to be recorded as the: Select one: a. Present value of the minimum lease payments. b. The future value of the minimum lease payments c. The fair market value of the leased asset. d. The sum of the cash payments over the term of the lease.
The appropriate valuation of an operating lease in the balance sheet of the lessee is? right of use asset present value of lease payments nil gross amount of lease payments
At the inception of a capital lease, the guaranteed residual value should be a. Included as part of minimum lease payments at present value. b. Included as part of minimum lease payments at future value. c. Included as part of minimum lease payments only to the extent that guaranteed residual value is expected to exceed estimated residual value. d. Excluded from minimum lease payments.
Initial direct costs incurred by the lessor under a sales-type lease should be a. Deferred and allocated over the economic life of the leased property. b. Expensed in the period incurred. c. Deferred and allocated over the term of the lease in proportion to the recognition of rental income. d. Added to the gross investment in the lease and amortized over the term of the lease as a yield adjustment.
The residual value is the estimated fair value of the leased property at the end of the lease term. a. Of what significance is (1) an unguaranteed and (2) a guaranteed residual value in the lessee's accounting for a finance lease transaction? b. Distinguish between lease payments used to determine lease classification compared to lease payments for measuring the lease liability.
The difference of gross investment in the lease and net investment in the lease of the lessor is? A. Total amount of interest that the lessee shall recognized as interest expense over the lease term. B. Interest income at inception of the lease. C. Total amount of interest that the lessor shall recognized as interest income over the lease term. D. Initial direct cost.
Each period of a finance lease, the lessee records a lease expense that includes which of the following? Group of answer choices Interest expense on the lease liability, using the effective interest rate method and the discount rate it used to compute the present value of the liability at the lease commencement date; variable lease payments not included in the lease liability in the period in which the obligation for the variable payments is incurred; and changes in variable lease payments that depend on an index or rate. Neither A nor B is correct. Interest expense on the lease liability, using the effective interest rate method and the discount rate it used to compute the present value of the liability at the lease commencement date; variable lease payments not included in the lease liability in the period in which the obligation for the variable payments is incurred. Both A & B are correct.
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 term
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.
At the inception of a finance lease, the guaranteed residual value should be Included at present value as part of the lease payments Included at undiscounted value as part of the lease payments. Ignored by the lessee in computing the lease payments Included at present value as part of the lease payments only to the extent that it exceeds the expected residual value
Initially, a lease liability is measured a. by the lessee at the present value of the lease payments that are not paid at the commencement date of the lease. b. by the lessor at the present value of the total lease payments payable at the commencement date of the lease. c. by the lessor at the total cost of the right-of-use asset. d. by the lessee at the total cost of the right-of-use asset.