exam 2

Glueck Inc. leases an asset with a cost of $200,000 to perl company. The present value of the annual lease payment is $320,000 and control of the asset is transferred to Perl Company. At the commencement of the lease, Glueck should credit

CREDIT NOT DEBIT Equipment $200,000 Sales Revenue $320,000

Glueck inc leases an asset with a cost of $200,000 to perl company. The present value of the annual lease payments is $320,000 and control of the asset is transerred to Perl Company. At the the commencement of the lease, Glueck should debit

DEBIT lease receivable $320,000

Sarah (lessee) leases a machine with a FV of $200k from Eden (lessor). The PV of the future lease payments is $120k. At the inception of the lease, sarah should

Debit right of use asset for 120k Credit lease payable for $120k

A lease structured as an installment purchase is called____ lease by the lessee

Finance lease

A contract in which an owner provides a user the right to use an asset in return for periodic cash payments over a period of time is called

Lease

Which of the following are criteria for classification as a finance lease

Ownership of the asset transfers to the lessee The lease includes a purchase option the lessee is reasonably certain to exercise The present value of the total lease payments is greater than substantially all of the fair value of the asset

____ - ____ is an estimate of a leased asset's commercial value at the end of the lease term

Residual Value

Which of the following occur in a sale-leaseback transaction?

The lessee pays periodic rental payments The lessee receives cash from the sale of the asset

An additional cash payment is __when a bargain purchase option is included in the lease agreement

expected

The___residual value is a commitment by the lessee that the lessor will recover a specified residual value at the end of the lease term

guaranteed

The effective interest rate of return the lease payments provide the lessor is referred to as the

implicit rate

The rate of the interest incurred by the lessee if funds were borrowed to purchase the leased asset is known as the ____ rate

incremental borrowing

A lease that is more true to the nature of a rental agreement is called___lease

operating

If a lease does not meet any of the criteria to be classified as a finance or sale-type lease, it is classified as an ___lease

operating

A __ is a lease provision giving the lessee the option to buy the leased property at the end of the lease term at a specified exercise price

purchase option

When the lessor calculates the periodic lease payments, the present value of the bargain purchase option should be

subtracted from the amount to be recovered through periodic rental payments