AC 311: Chapter 15 Kahoot

For the lessee to account for a lease as finance, the lease must meet:

Any one of the five criteria specified by GAAP

Interest expense for a finance lease is expected to ___________ each year.

Decrease; outstanding liability is decreasing as you are paying it off

Interest expense for an operating lease is expected to __________ each year.

Decrease

True or False: Total lease expense (interest & amortization) for a finance lease will be the same amount each year.

False; is the same for an operating lease

True or False: A bargain purchase option is an option to purchase the leased asset at a price equal to its expected fair value.

False; less than?

Amortization expense for the ROU asset in an operating lease is expected to ___________ each year.

Increase

With the exception of the first lease payment, each lease payment typically has a component of:

Interest expense and lease payable reduction

The lessee in an operating lease should record:

Interest expense, amortization expense, and a right of use asset

The lessee measures the ROU asset for a finance lease to be recorded at the:

Present value of the lease payments

The lessee measures the ROU asset for an operating lease to be recorded as the:

Present value of the lease payments

The lessee measures the lease liability for a finance lease to be recorded as the:

Present value of the lease payments

The lessee measures the lease liability for an operating lease to be recorded as the:

Present value of the lease payments

Amortization expense for the ROU asset in a finance lease is expected to __________ each year.

Remain the same; straight-line amortization expense

In connection with a lease greater than 12 months long, the lessee will always record each of the following except:

Revenue; will record an asset, liability, and expense

Distinguishing between operating and finance leases is due in large part to the accounting concept of:

Substance over form

Which of the following is NOT a criteria for classifying a lease as finance?

The leased asset has an alternate use to lessor at the end of the lease

A leasehold improvement should be depreciated on a straight-line basis over:

The shorter of the lease term or useful life of the improvement

True or False: All other factors remaining equal, the annual lease payable reduction for a finance lease is the same for operating.

True

True or False: Total lease expense (interest & amortization) for an operating lease will be the same amount each year.

True

True or False: All other factors remaining equal, the amount of interest expense recorded for a finance lease is the same for operating.

True; both use effective interest method