The initial direct costs of leasing include lessor advertising costs. are generally borne by the lessee. are expensed in the period of the sale under a sales-type lease. include incremental costs
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The initial direct costs of leasing
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- 1. Which statement is incorrect about initial direct costs? a. Initial direct costs incurred by the lessee in finance lase are added to the amount recognized as an asset and to the finance lease liability. b. In a direct financing lease, initial direct costs are added to the net investment in the lease. c. In a sales type lease, initial direct costs are expensed as component of cost of goods sold. d. For operating leases, initial direct costs are deferred and allocated over the lease term. 2. If the lessor and lessee use different interest rates to account for a finance lease, then a. The lessor will use different account titles to record the leasing transactions b. Total expenses and revenues will be equal c. Total expenses and revenues will be different d. The lessee and the lessor cannot use different interest rates 3. In the case of a lease of land and building where title to the land is not transferred, the lease is generally treated as if: a. Both land and building are finance…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.Which of the following statements is true about initial direct costs? A. Initial direct costs of a sales-type lease should be expensed at the commencement of the lease only if no selling profit or loss has been incurred. B. Initial direct costs are ownership-type costs such as insurance, maintenance, and taxes. C. Initial direct costs of an operating lease should be recorded by the lessor as a prepaid asset. D. Initial direct costs should always be debited against income by the lessor in the period of the inception of the lease.
- 44. The right-of-use asset is increased by lease prepayments made by the lessee and initial direct costs incurred by the lessee. lease incentives received. initial direct costs incurred by the lessee only. prepaid lease payments only.The initial direct costs incurred in relation to a lease transaction is added to A)the cost of sales of lessee under a sales-type lease B)get the net investment for the lessor under a direct finance lease C)get the net investment for the lessor under a sales-type lease D)get the right of use asset for the lessorCh19-1: Is leasing a zero sum game in the sense that any gain to the lessee is a cost to the lessor? If not, how might both parties gain from a lease transaction? In your answer, explain how lessee and the lessor analyze the situation, why they might use different inputs in their analysis, and how those inputs differences could affect the outcome
- 32 The cost of sales recognized at the commencement of the lease term by a manufacturer or dealer is equal toA. carrying amount of the leased asset.B. carrying amount of the leased asset minus the unguaranteed residual value in absolute amount.C. carrying amount of the leased asset minus the present value of the unguaranteed residual value.D. carrying amount of the leased asset minus the present value of the guaranteed residual value.Under ASPE, the lessor is required to expense any direct costs associated with a lease up front. True False Kindly solve it.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.
- Answer True or False Initial direct costs are immediately recognized as an expense by the lessor when the cost incurred in conjunction with an operating lease. Both finance and operating leases are subject to capitalization. Under an operating lease, the lease bonus paid by the lessee to the lessor and amortized over the lease term as a reduction to lease income. When rental payments vary over the term of the operating lease, the lessor should recognize lease income on a straight-line basis, unless there is another method that is more appropriate Initial direct costs are immediately recognized as an expense by the lessor when the cost incurred in conjunction with an operating lease. The lessor uses the implicit interest rate in determining the present value of the lease payments Termination penalties are included in the lease payments if the lease term reflects the lessee exercising an option to terminate the lease. In a sale and leaseback transaction that qualifies as a sale under…2. In a lease that is not classified as a manufacturer's lease, initial direct cost is a. added to the cost of the asset to get the gross investment in the lease. b. added to the cost of the liability to get the net investment in the lease. c. added to the cost of the liability to get the gross investment in the lease. d. added to the cost of the asset to get the net investment in the lease.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.