Intermediate Accounting 2 Ch 13-15

In a finance lease:

the lessee records an asset and a liability for the present value of lease payments.

Additional cash payment included in lease liability calculation.

Bargain purchase option

A discount on a noninterest-bearing note payable is classified in the balance sheet as:

A contra liability.

When cash is received from customers in the form of a refundable deposit, the cash account is increased with a corresponding increase in:

A current liability.

Which of the following is not a current liability?

A note payable due in two years.

Which of the following is the best definition of a current liability?

An obligation expected to be satisfied with current assets or by the creation of other current liabilities.

Which of the following is not a liability?

An unused line of credit.

GAAP requires that some lease agreements be accounted for as purchases of assets. The theoretical justification for this treatment is that a lease of this type:

Conveys most of the benefits of property ownership.

All of the following but one represent collections for third parties. Which one of the following is not a collection for a third party?

Customer deposits.

The rate of interest that actually is incurred on a bond payable is called the:

Effective rate.

From the perspective of the lessee, leases may be classified as either:

Finance or operating.

Which of the following is not a characteristic of a liability?

It must be payable in cash.

For a bond issue that sells for more than the bond face amount, the effective interest rate is:

Less than the rate stated on the face of the bond.

Residual Value

Lessee's guarantee

At times, businesses require advance payments from customers that will be applied to the purchase price when goods are delivered or services provided. These customer advances represent:

Liabilities until the product or service is provided.

Short-term lease.

No amortization of lease asset

Maintance fees

Nonlease components

Operating costs borne by the lessee.

Nonlease components

The most common type of liability is:

One to be paid in cash and for which the amount and timing are known.

Amortization a "plug" figure.

Operating lease

Straight-line lease expense.

Operating lease

Bonds usually sell at their:

Present value.

Viewed as an additional payment when reasonably certain.

Purchase option

Viewed as an additional payment when less than guarantee.

Residual value

When a finance lease is first recorded at the beginning of the lease, the lessee typically debits:

Right-of-use asset.

Initial direct costs

Sales-type lease selling expense

The rate of interest printed on the face of a note payable is called the:

Stated rate.

Interest expense is:

The effective interest rate times the amount of the debt outstanding during the interest period.

Leasing has become the number one method of external financing by U.S. companies. Reasons include each of the following except:

extended use of the asset.