Infinity 0.21
In 2018, Sauder should record interest expense of a. $63,397. b. $116,604. c. $83,396. d. $136,604.
a. $63,397.
Hay Stack Inc PV Annuity Due PV Ordinary Annuity PV Single Sum 8%, 5 periods 4.31213 3.99271 .68508 10%, 5 periods 4.16986 3.79079 .62092 a. $175,820 b. $162,795 c. $181,972 d. $195,356
a. $175,820
A lessee with a capital lease containing a bargain purchase option should depreciate the leased asset over the a. asset's remaining economic life. b. term of the lease. c. life of the asset or the term of the lease, whichever is shorter. d. life of the asset or the term of the lease, whichever is longer.
a. asset's remaining economic life.
A lessor with a sales-type lease involving an unguaranteed residual value available to the lessor at the end of the lease term will report sales revenue in the period of inception of the lease at which of the following amounts? a. The minimum lease payments plus the unguaranteed residual value. b. The present value of the minimum lease payments. c. The cost of the asset to the lessor, less the present value of any unguaranteed residual value. d. The present value of the minimum lease payments plus the present value of the unguaranteed residual value.
b. The present value of the minimum lease payments.
In a sale-leaseback transaction in which none of the four leasing criteria are satisfied, which of the following is false? a. The seller-lessee removes the asset from its books. b. The purchaser-lessor records a gain. c. The seller-lessee records the lease as an operating lease. d. All of the answers are false statements.
b. The purchaser-lessor records a gain.
Assuming the first payment is made on time, the amount that should be reported by Kuhn Corporation as the lease liability on its December 31, 2018 balance sheet is a. $2,640,792. b. $2,454,870. c. $2,376,714. d. $2,190,792.
d. $2,190,792.
Holt Company What is the amount of the minimum annual lease payment? (Rounded to the nearest dollar.) a. $272,703 b. $872,703 c. $887,703 d. $902,703
c. $887,703
An essential element of a lease is that the a. lessor conveys less than his or her total interest in the property. b. lessee provides a sinking fund equal to one year's lease payments. c. property that is the subject of the lease agreement must be held for sale by the lessor prior to the drafting of the lease agreement. d. term of the lease is substantially equal to the economic life of the leased property.
c. a lease reflects the purchase or sale of a quantifiable right to the use of property.
With respect to this capitalized lease, for 2019 Ogleby should record a. interest expense of $57,058 and depreciation expense of $107,225. b. interest expense of $75,058 and depreciation expense of $107,225. c. interest expense of $44,764 and depreciation expense of $107,225. d. interest expense of $62,764 and depreciation expense of $107,225.
c. interest expense of $44,764 and depreciation expense of $107,225.
The primary difference between a direct-financing lease and a sales-type lease is the a. manner in which rental receipts are recorded as rental income. b. amount of the depreciation recorded each year by the lessor. c. recognition of the manufacturer's or dealer's profit at (or loss) the inception of the lease. d. allocation of initial direct costs by the lessor to periods benefited by the lease arrangements.
c. recognition of the manufacturer's or dealer's profit at (or loss) the inception of the lease.
In a lease that is recorded as a sales-type lease by the lessor, interest revenue a. should be recognized in full as revenue at the lease's inception. b. should be recognized over the period of the lease using the straight-line method. c. should be recognized over the period of the lease using the effective interest method. d. does not arise.
c. should be recognized over the period of the lease using the effective interest method.
For a sales-type lease, a. the sales price includes the present value of the unguaranteed residual value. b. the present value of the guaranteed residual value is deducted to determine the cost of goods sold. c. the gross profit will be the same whether the residual value is guaranteed or unguaranteed. d. None of these answers are correct.
c. the gross profit will be the same whether the residual value is guaranteed or unguaranteed.
In order to properly record a direct-financing lease, the lessor needs to know how to calculate the lease receivable. The lease receivable in a direct-financing lease is best defined as a. the amount of funds the lessor has tied up in the asset which is the subject of the direct-financing lease. b. the difference between the lease payments receivable and the fair value of the leased property. c. the present value of minimum lease payments. d. the total book value of the asset less any accumulated depreciation recorded by the lessor prior to the lease agreement.
c. the present value of minimum lease payments.
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. None of these answers are correct.
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.
If the residual value of a leased asset is guaranteed by a third party a. it is treated by the lessee as no residual value. b. the third party is also liable for any lease payments not paid by the lessee. c. the net investment to be recovered by the lessor is reduced. d. it is treated by the lessee as an additional payment and by the lessor as realized at the end of the lease term.
d. it is treated by the lessee as an additional payment and by the lessor as realized at the end of the lease term.
If the lease in a sale-leaseback transaction meets one of the four leasing criteria and is therefore accounted for as a capital lease, who records the asset on its books and which party records interest expense during the lease period? Party recording the Party recording asset on its books interest expense a. Seller-lessee Purchaser-lessor b. Purchaser-lessor Seller-lessee c. Purchaser-lessor Purchaser-lessor d. Seller-lessee Seller-lessee
d. Seller-lessee Seller-lessee
Which of the following is an advantage of captive leasing companies over the other players in the leasing market? a. They have access to low-cost funds allowing them to purchase assets at lower cost. b. They are good at developing innovative contracts that help avoid accounting problems. c. They provide leasing arrangements for a wider range of products than the parent company's product line. d. They have the point-of-sale advantage in finding leasing customers.
d. They have the point-of-sale advantage in finding leasing customers.
Jamar Co. sold its headquarters building at a gain, and simultaneously leased back the building. The lease was reported as a capital lease. At the time of the sale, the gain should be reported as a. operating income. b. comprehensive income net of income tax. c. a separate component of stockholders' equity. d. a deferred gain.
d. a deferred gain.
Minimum lease payments may include a a. penalty for failure to renew. b. bargain purchase option. c. guaranteed residual value. d. any of these provisions.
d. any of these provisions.
When a company sells property and then leases it back, any gain on the sale should usually be a. recognized in the current year. b. recognized as a prior period adjustment. c. recognized at the end of the lease. d. deferred and recognized as income over the term of the lease.
d. deferred and recognized as income over the term of the lease.
Lessees prefer to account for their leases as operating lease because: a. it increases their debt to total equity ratio. b. it decreases the income tax expense. c. it increases the amount of total assets. d. it decreases the amount of liability reported.
d. it decreases the amount of liability reported.
Major reasons why a company may become involved in leasing to other companies is (are) a. interest revenue. b. high residual values. c. tax incentives. d. All of these answers are correct.
d. All of these answers are correct.
Which of the following statements is correct? a. For direct-financing leases, initial direct costs are added to the net investment in the lease. b. For sales-type leases, initial direct costs are expensed in the year of incurrence. c. For operating leases, initial direct costs are deferred and allocated over the lease term. d. All of these answers are correct.
d. All of these answers are correct.
Which of the following would not be included in the Lease Receivable account? a. Guaranteed residual value b. Unguaranteed residual value c. A bargain purchase option d. All of these would be included in the Lease Receivable account.
d. All of these would be included in the Lease Receivable account.
If the lease was nonrenewable, there was no bargain purchase option, title to the building does not pass to the lessee at termination of the lease and the lease term was only for eight years, what type of lease would this be for the lessee? a. Sales-type lease b. Direct-financing lease c. Operating lease d. Capital lease
d. Capital lease
Gold Star Leasing PV Annuity Due PV Ordinary Annuity PV Single Sum 8%, 5 periods 4.31213 3.99271 .68508 10%, 5 periods 4.16986 3.79079 .62092 a. Cash 160,000 Lease Receivable 740,000 Equipment 900,000 b. Cash 160,000 Lease Receivable 529,940 Loss 210,060 Equipment 900,000 c. Cash 160,000 Lease Receivable 569,270 Equipment 729,270 d. Cash 160,000 Lease Receivable 598,449 Equipment 758,449
d. Cash 160,000 Lease Receivable 598,449 Equipment 758,449
Silver Paint Co. PV Annuity Due PV Ordinary Annuity PV Single Sum 8%, 5 periods 4.31213 3.99271 .68508 10%, 5 periods 4.16986 3.79079 .62092 a. $70,200 b. $56,160 c. $62,400 d. $78,000
b. $56,160
In its December 31, 2018 balance sheet, Burton should report a lease liability of a. $1,137,240. b. $1,275,000. c. $1,408,770. d. $1,437,240.
a. $1,137,240.
Pisa Inc. PV Annuity Due PV Ordinary Annuity 8%, 4 periods 3.57710 3.31213 10%, 4 periods 3.48685 3.16986 a. $1,231,066 b. $1,090,912 c. $1,139,874 d. $1,200,000
a. $1,231,066
The methods of accounting for a lease by the lessee are a. operating and capital lease methods. b. operating, sales, and capital lease methods. c. operating and leveraged lease methods. d. None of these answers are correct.
a. operating and capital lease methods.
The equipment, which has been continually on lease since July 1, 2013, is being depreciated on a straight-line basis over an eight-year period with no salvage value. Assuming that both the lease to Emley and the lease to Terry are appropriately recorded as operating leases for accounting purposes, what is the amount of income (expense) before income taxes that each would record as a result of the above facts for the year ended December 31, 2018? Hook Emley Terry a. $280,000 $(480,000) $(600,000) b. $280,000 $(480,000) $(1,000,000) c. $1,080,000 $(80,000) $(200,000) d. $1,080,000 $(880,000) $(600,000)
a. $280,000 $(480,000) $(600,000)
Assuming that Sands, Inc. uses straight-line depreciation, what is the amount of depreciation and interest expense that Sands should record for the year ended December 31, 2018? a. $300,000 and $206,880 b. $300,000 and $240,000 c. $3,600,000 and $206,880 d. $3,600,000 and $160,000
a. $300,000 and $206,880
The income before income taxes derived by Hull from this lease for the year ended December 31, 2018, should be a. $518,000. b. $630,000. c. $1,148,000. d. $1,260,000.
a. $518,000.
For the year ended December 31, 2018, what amount of income should Torrey realize from the lease transaction? a. $850,000 b. $1,100,000 c. $1,150,000 d. $1,650,000
a. $850,000
Based solely upon the following sets of circumstances indicated below, which set gives rise to a sales-type or direct-financing lease of a lessor? Transfers Ownership Contains Bargain Collectibility of Lease Any Important by End of Lease? Purchase Option? Payments Assured? Uncertainties? a. No Yes Yes No b. Yes No No No c. Yes No No Yes d. No Yes Yes Yes
a. No Yes Yes No
From the viewpoint of Yates, what type of lease agreement exists? a. Operating lease b. Capital lease c. Sales-type lease d. Direct-financing lease
a. Operating lease
From the lessor's viewpoint, what type of lease is involved? a. Sales-type lease b. Sale-leaseback c. Direct-financing lease d. Operating lease
a. Sales-type lease
In computing depreciation of a leased asset, the lessee should subtract a. a guaranteed residual value and depreciate over the term of the lease. b. an unguaranteed residual value and depreciate over the term of the lease. c. a guaranteed residual value and depreciate over the life of the asset. d. an unguaranteed residual value and depreciate over the life of the asset.
a. a guaranteed residual value and depreciate over the term of the lease.
When lessors account for residual values related to leased assets, they a. include the residual value because it is assumed the residual value will be realized. b. include the unguaranteed residual value in sales revenue. c. recognize more gross profit on a sales-type lease with a guaranteed residual value than on a sales-type lease with an unguaranteed residual value. d. All of the answers are true with regard to lessors and residual values.
a. include the residual value because it is assumed the residual value will be realized.
A lessee had a ten-year capital lease requiring equal annual payments. The reduction of the lease liability in year 2 should equal a. the current liability shown for the lease at the end of year 1. b. the current liability shown for the lease at the end of year 2. c. the reduction of the lease liability in year 1. d. one-tenth of the original lease liability.
a. the current liability shown for the lease at the end of year 1.
Mays Company has a machine with a cost of $750,000 which also is its fair value on the date the machine is leased to Park Company. The lease is for 6 years and the machine is estimated to have an unguaranteed residual value of $75,000. If the lessor's interest rate implicit in the lease is 12%, the six beginning-of-the-year lease payments would be a. $162,874. b. $154,623. c. $146,587. d. $125,000.
b. $154,623.
Gage Co. The total lease-related income recognized by the lessee during 2019 is which of the following? a. $ -0- b. $4,000 c. $6,000 d. $60,000
b. $4,000
In 2019, Sauder should record interest expense of a. $43,397. b. $49,737. c. $69,737. d. $63,397.
b. $49,737.
Falk's rent expense for this equipment for the year ended December 31, 2018, should be a. $288,000. b. $72,000. c. $120,000. d. $96,000.
b. $72,000.
What is the amount of profit on the sale and the amount of interest revenue that Metro should record for the year ended December 31, 2018? a. $0 and $137,920 b. $750,000 and $206,880 c. $750,000 and $240,000 d. $1,200,000 and $480,000
b. $750,000 and $206,880
The entire amount of $880,000 was charged to rent expense in 2018. What amount should Goetz have charged to expense for the year ended December 31, 2018? a. $80,000 b. $85,333 c. $165,333 d. $640,000
b. $85,333
Gage Co. What is the discount rate implicit in the amortization schedule presented above? a. 12% b. 10% c. 8% d. 6%
b. 10%
What type of lease is this from Alt Corporation's viewpoint? a. Operating lease b. Capital lease c. Sales-type lease d. Direct-financing lease
b. Capital lease
Gold Star Leasing PV Annuity Due PV Ordinary Annuity PV Single Sum 8%, 5 periods 4.31213 3.99271 .68508 10%, 5 periods 4.16986 3.79079 .62092 a. Lease Equipment 598,449 Lease Liability 598,449 b. Leased Equipment 758,449 Cash 160,000 Lease Liability 598,449 c. Leased Equipment 689,940 Cash 160,000 Lease Liability 529,940 d. Leased Equipment 707,342 Cash 160,000 Lease Liability 547,342
b. Leased Equipment 758,449 Cash 160,000 Lease Liability 598,449
Which of the following best describes current practice in accounting for leases? a. Leases are not capitalized. b. Leases similar to installment purchases are capitalized. c. All long-term leases are capitalized. d. All leases are capitalized.
b. Leases similar to installment purchases are capitalized.
If Alt accounts for the lease as an operating lease, what expenses will be recorded as a consequence of the lease during the fiscal year ended December 31, 2018? a. Depreciation Expense b. Rent Expense c. Interest Expense d. Depreciation Expense and Interest Expense
b. Rent Expense
What impact does a bargain purchase option have on the present value of the minimum lease payments computed by the lessee? a. There is no impact as the option does not enter into the transaction until the end of the lease term. b. The lessee must increase the present value of the minimum lease payments by the present value of the option price. c. The lessee must decrease the present value of the minimum lease payments by the present value of the option price. d. The minimum lease payments would be increased by the present value of the option price if, at the time of the lease agreement, it appeared certain that the lessee would exercise the option at the end of the lease and purchase the asset at the option price.
b. The lessee must increase the present value of the minimum lease payments by the present value of the option price.
From the lessee's perspective, in the earlier years of a lease, the use of the a. capital method will enable the lessee to report higher income, compared to the operating method. b. capital method will cause debt to increase, compared to the operating method. c. operating method will cause income to decrease, compared to the capital method. d. operating method will cause debt to increase, compared to the capital method.
b. capital method will cause debt to increase, compared to the operating method.
The amount to be recorded as the cost of an asset under capital lease is equal to the a. present value of the minimum lease payments. b. present value of the minimum lease payments or the fair value of the asset, whichever is lower. c. present value of the minimum lease payments plus the present value of any unguaranteed residual value. d. carrying value of the asset on the lessor's books.
b. present value of the minimum lease payments or the fair value of the asset, whichever is lower.
If Yates records this lease as a direct-financing lease, what amount would be recorded as Lease Receivable at the inception of the lease? a. $574,864 b. $1,572,564 c. $1,600,000 d. $1,724,592
c. $1,600,000
In its 2018 income statement, what amount of interest expense should Hernandez report from this lease transaction? a. $0 b. $135,000 c. $150,000 d. $180,000
c. $150,000
Assuming that the lease is appropriately recorded as a sale for accounting purposes by Pye, what is the amount of profit on the sale and the interest revenue that Pye would record for the year ended December 31, 2018? a. $192,000 and $151,200 b. $192,000 and $129,600 c. $192,000 and $64,800 d. $0 and $0
c. $192,000 and $64,800
Assuming all payments are made on time, the amount that should be reported by Lang Corporation as the total obligation under capital leases on its December 31, 2019 balance sheet is a. $2,727,635. b. $2,500,397. c. $2,177,634. d. $3,000,000.
c. $2,177,634.
Pisa Inc PV Annuity Due PV Ordinary Annuity 8%, 4 periods 3.57710 3.31213 10%, 4 periods 3.48685 3.16986 a. $0 because the asset is depreciated by Tower Company. b. $284,968 c. $307,767 d. $300,000
c. $307,767
Gage Co. From the viewpoint of the lessor, what type of lease is involved above? a. Sales-type lease b. Sale-leaseback c. Direct-financing lease d. Operating lease
c. Direct-financing lease
If, at the end of the lease, the fair value of the residual value is $11,800, what gain or loss should Geary record? a. $2,680 gain b. $6,280 loss c. $4,200 loss d. $11,800 gain
c. $4,200 loss
Silver Point Co. What is the book value of the leased asset at December 31, 2018? a. $780,000 b. $624,000 c. $468,000 d. $499,200
c. $468,000
If the present value of the future lease payments is $1,600,000 at January 1, 2018, what is the amount of the reduction in the lease liability for Alt Corp. in the second full year of the lease if Alt Corp. accounts for the lease as a capital lease? (Rounded to the nearest dollar.) a. $414,852 b. $446,852 c. $472,350 d. $456,350
c. $472,350
Assuming that the lease is appropriately recorded as a sale for accounting purposes by Koenig, what is the amount of profit on the sale and the interest income that Koenig would record for the year ended December 31, 2018? a. $0 and $0 b. $0 and $166,600 c. $565,000 and $166,600 d. $565,000 and $198,600
c. $565,000 and $166,600
Yancey, Inc. would record depreciation expense on this storage building in 2018 of (Rounded to the nearest dollar.) a. $0. b. $495,000. c. $600,000. d. $976,471.
c. $600,000.
Assuming that the lease is appropriately recorded as a sale for accounting purposes by Harter, what amount of interest revenue would Harter record for the year ended December 31, 2018? a. $157,500 b. $135,000 c. $67,500 d. $0
c. $67,500
Assuming that this lease is properly classified as a capital lease, what is the amount of interest expense recorded by Pisa, Inc. in the first year of the asset's life? PV Annuity Due PV Ordinary Annuity 8%, 4 periods 3.57710 3.31213 10%, 4 periods 3.48685 3.16986 a. $0 b. $98,482 c. $70,953 d. $91,192
c. $70,953
Metcalf should record the leased asset at a. $848,761. b. $814,435. c. $723,943. d. $694,665.
c. $723,943.
Holt Company From the lessee's viewpoint, what type of lease exists in this case? a. Sales-type lease b. Sale-leaseback c. Capital lease d. Operating lease
c. Capital lease
Lease A Lease B a. Operating lease Capital lease b. Operating lease Operating lease c. Capital lease Capital lease d. Capital lease Operating lease
c. Capital lease Capital lease
Gold Star Leasing PV Annuity Due PV Ordinary Annuity PV Single Sum 8%, 5 periods 4.31213 3.99271 .68508 10%, 5 periods 4.16986 3.79079 .62092 a. Lease Liability 160,000 Cash 160,000 b. Lease Liability 117,604 Interest Payable 42,396 Cash 160,000 c. Lease Liability 112,124 Interest Payable 47,876 Cash 160,000 d. Lease Liability 116,212 Interest Payable 43,788 Cash 160,000
c. Lease Liability 112,124 Interest Payable 47,876 Cash 160,000
Ignoring income taxes, the amount of expense incurred by Riggs from this lease for the year ended December 31, 2018, should be a. $518,000. b. $630,000. c. $1,148,000. d. $1,260,000.
d. $1,260,000.
Which of the following is a correct statement of one of the capitalization criteria? a. The lease transfers ownership of the property to the lessor. b. The lease contains a purchase option. c. The lease term is equal to or more than 75% of the estimated economic life of the leased property. d. The minimum lease payments (excluding executory costs) equal or exceed 90% of the fair value of the leased property.
c. The lease term is equal to or more than 75% of the estimated economic life of the leased property.
To avoid leased asset capitalization, companies can devise lease agreements that fail to satisfy any of the four leasing criteria. Which of the following is not one of the ways to accomplish this goal? a. Lessee uses a higher interest rate than that used by lessor. b. Set the lease term at something less than 75% of the estimated useful life of the property. c. Write in a bargain purchase option. d. Use a third party to guarantee the asset's residual value.
c. Write in a bargain purchase option.
While only certain leases are currently accounted for as a sale or purchase, there is theoretical justification for considering all leases to be sales or purchases. The principal reason that supports this idea is that a. all leases are generally for the economic life of the property and the residual value of the property at the end of the lease is minimal. b. at the end of the lease the property usually can be purchased by the lessee. c. a lease reflects the purchase or sale of a quantifiable right to the use of property. d. during the life of the lease the lessee can effectively treat the property as if it were owned.
c. a lease reflects the purchase or sale of a quantifiable right to the use of property.
The initial direct costs of leasing a. are generally borne by the lessee. b. include incremental costs related to internal activities of leasing, and internal costs related to costs paid to external third parties for originating a lease arrangement. c. are expensed in the period of the sale under a sales-type lease. d. All of the answers are true with regard to the initial direct costs of leasing.
c. are expensed in the period of the sale under a sales-type lease.
The Lease Liability account should be disclosed as a. a current liability. b. a noncurrent liability. c. current portions in current liabilities and the remainder in noncurrent liabilities. d. deferred credits.
c. current portions in current liabilities and the remainder in noncurrent liabilities.
With respect to this capitalized lease, Dean should record for 2018 a. lease expense of $200,000. b. interest expense of $89,468 and depreciation expense of $76,136. c. interest expense of $107,361 and depreciation expense of $89,468. d. interest expense of $91,363 and depreciation expense of $134,202.
c. interest expense of $107,361 and depreciation expense of $89,468.
With respect to this capitalized lease, for 2018 Ogleby should record a. rent expense of $180,000. b. interest expense of $57,058 and depreciation expense of $150,116. c. interest expense of $57,058 and depreciation expense of $107,225. d. interest expense of $90,000 and depreciation expense of $181,956.
c. interest expense of $57,058 and depreciation expense of $107,225.
In Haden's December 31, 2018 balance sheet, the deferred profit from the sale of this machine should be a. $102,000. b. $90,000. c. $12,000. d. $0.
d. $0.
Emporia Corporation What amount of depreciation expense would the lessee record for the first year of the lease? a. $180,000 b. $160,000 c. $120,000 d. $100,000
d. $100,000
In its 2018 income statement, what amount of depreciation expense should Hernandez report from this lease transaction? a. $300,000 b. $240,000 c. $180,000 d. $120,000
d. $120,000
Pisa Inc PV Annuity Due PV Ordinary Annuity 8%, 4 periods 3.57710 3.31213 10%, 4 periods 3.48685 3.16986 a. $344,152 b. $245,666 c. $252,960 d. $273,199
d. $273,199
The lease is appropriately accounted for as a capital lease by Harris. In its December 31, 2019 balance sheet, Harris should report a lease liability of a. $6,340,000. b. $6,240,000. c. $5,706,000. d. $4,974,000.
d. $4,974,000.
Gage Co. What is the amount of the lessee's liability to the lessor after the December 31, 2020 payment? a. $600,000 b. $562,353 c. $520,942 d. $475,389
d. $475,389
Holt Company What is the amount of the total annual lease payment? a. $272,703 b. $872,703 c. $887,703 d. $902,703
d. $902,703
Gage Co. The total lease-related expenses recognized by the lessee during 2019 is a. $96,000. b. $97,647. c. $110,235. d. $92,235.
d. $92,235.
Which of the following lease-related revenue and expense items would be recorded by Yates if the lease is accounted for as an operating lease? a. Rent Revenue only b. Interest Revenue only c. Depreciation Expense only d. Rent Revenue and Depreciation Expense
d. Rent Revenue and Depreciation Expense
