Which of the following statements is false regarding the accounting for leases? The amount of lease income recognized each year by the lessor under an operating lease is typically O constant even though the contractual payments increase every year by a certain amount specified in the contract. O A lessor includes a rent collected in advance as part of the cost of the leased asset. A lessor includes initial direct costs incurred on the operating lease as part of the cost of the leased asset, and initial direct costs are to be recognized in profit or loss on the same basis as rent income is recognized. The lessor may not use the straight-line basis for recognizing lease income under an operating lease if O another systematic basis is more representative of the pattern in which benefit from the use of the underlying asset is diminished.

Which of the following statements is false regarding the accounting for leases? The amount of lease income recognized each year by the lessor under an operating lease is typically O constant even though the contractual payments increase every year by a certain amount specified in the contract. O A lessor includes a rent collected in advance as part of the cost of the leased asset. A lessor includes initial direct costs incurred on the operating lease as part of the cost of the leased asset, and initial direct costs are to be recognized in profit or loss on the same basis as rent income is recognized. The lessor may not use the straight-line basis for recognizing lease income under an operating lease if O another systematic basis is more representative of the pattern in which benefit from the use of the underlying asset is diminished.

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter9: Long-term Liabilities

Section: Chapter Questions

Problem 17MCQ: Which of the following statements regarding the new accounting rules, which take effect in 2019, for...

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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 information in RE20-3. Prepare the journal entries that Garvey Company would make in the first year of the lease assuming the lease is classified as a finance lease. However, assume that Garvey is now required to make the 65,949.37 payments on January 1 each year and that the fair value at the lease inception is now 275,000 (65,949:37 4:169865).
Which of the following statements regarding the new accounting rules, which take effect in 2019, for leases is false? If the lease term is one year or longer, a liability must be recognized. If the lease term is less than one year, an asset must be recognized. The new lease accounting rules will result in more assets and liabilities being recognized on the balance sheet. Leasing will likely remain popular under the new lease accounting rules because leases do not require a large initial outlay of cash.
Lessee and Lessor Accounting Issues The following information is available for a noncancelable lease of equipment entered into on March 1, 2019. The lease is classified as a sales-type lease by the lessor (Anson Company) and as a finance lease by the lessee (Bullard Company). Assume that the lease payments are nude at the beginning of each month, interest and straight-line depreciation are recognized at the end of each month, and the residual value of the leased asset is zero at the end of a 3-year life. Required: 1. Record the lease (including the initial receipt of 2,000) and the receipt of the second and third installments of 2,000 in Ansons accounts. Carry computations to the nearest dollar. 2. Record the lease (including the initial payment of 2,000), the payment of the second and third installments of 2,000, and monthly depreciation in Bullards accounts. The lessee records the lease obligation at net present value. Carry computations to the nearest dollar.
Lessor Accounting with Guaranteed Residual Value Use the information for Edom Company in E20-8, except that the residual value was guaranteed by Davis Company (the lessee). Required: 1. Assuming that the lease is a sales-type lease, calculate the selling price. 2. Prepare a table summarizing the lease receipts and interest income earned by Edom. 3. Prepare journal entries for Edom tor the years 2019 and 2020.
Use the information in RE20-3. Prepare the journal entries that Richie Company (the lessor) would make in the first year of the lease assuming the lease is classified as a sales-type lease. Assume that the lessee is required to make payments on December 31 each year. Also assume that Richie had purchased the equipment at a cost of 200,000.
Use the information in RE20-1. Prepare the journal entry that Keller Corporation would make during the first year of the lease assuming that the lease is classified as an operating lease.
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
Which of the following statements is false regarding the accounting for leases? The lessor may not use the straight-line basis for recognizing lease income under an operating lease if another systematic basis is more representative of the pattern in which benefit from the use of the underlying asset is diminished. The amount of lease income recognized each year by the lessor under an operating lease is typically constant even though the contractual payments increase every year by a certain amount specified in the contract. A lessor includes initial direct costs incurred on the operating lease as part of the cost of the leased asset, and initial direct costs are to be recognized in profit or loss on the same basis as rent income is recognized. A lessor includes a rent collected in advance as part of the cost of the leased asset.
Under the pre-2019 accounting standards, how are operating leases reported in the lessee's balance sheet? Select one: A. As an asset that is depreciated, similar to the company's other assets. B. As either a short-term or long-term liability, depending on the length of the lease C. At the present value of the future minimum lease payments. D. Operating leases are not disclosed in the lessee's balance sheet or annual report. E. None of the above
Which of the following is incorrect regarding the accounting for leases by a lessee? A. A lessee recognizes the same total amount of expense on a lease whether it uses the general recognition or the recognition exemption under PFRS 16. B. The interest expense on a lease liability decreases each period C. According to PFRS 16, executory costs, such as insurance and real property taxes, are always excluded from lease payments regardless of whether these costs transfer goods or services to the leasee. D. A lessee shall allocate the total consideration in a contract to the lease components and non-lease components of the contract
Which of the following is false with respect to lease accounting under IFRS? IFRS require lessees to recognize a right-of-use asset and related lease liability for leases with terms longer than one year. IFRS does not include any explicit guidance on collectibility of the lease payments by lessors and amounts necessary to satisfy a residual value guarantee. IFRS does not permit recognition of selling profit on direct financing leases at lease commencement. IFRS uses essentially the same lessor accounting model as GAAP for leases classified as sales-type or operating.