Intermediate Accounting Chapter 21 Updated

If the lease in a sale-leaseback transaction meets one of the five lease tests and is therefore accounted for as a finance 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-lessord. Seller-lesseeSeller-lessee

D

When a company sells property and then leases it back, any gain on the sale should usually be a. deferred and recognized as income over the term of the lease. b. recognized as a prior period adjustment .c. recognized at the end of the lease. d. recognized in the current year.

D

Which of the following are reasons why a company is involved in leasing to other companies?I. Interest revenue. II. High residual values. III. Tax incentives. IV. Guaranteed bargain purchase options . a. I, II, IV .b. II, III, and IV. c. I, III, and IV. d. I, II, and III.

D

Which of the following is not one of the lease classification tests? a. Transfer of ownership b. Purchase option c. Lease term d. Collectibility

D

Which of the following would be included in the Lease Receivable account? I. Guaranteed residual value. II. Unguaranteed residual value. III. Executory costs IV. Rental payments. a. I and III only .b. II, III, and IV. c. I and II only. d. I, II, and IV.

D

A lessee with a finance 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

A single lease expense is recognized on the income statement for a. an operating lease. b. a finance lease. c. both a finance lease and an operating lease. d. neither a finance lease or an operating lease

A

In computing amortization of a leased asset where there is no bargain purchase option, the lessee should subtract a. no 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

The amount to be recorded as the cost of an asset under finance lease is equal to the a. present value of the lease payments .b. present value of the lease payments or the fair value of the asset, whichever is lower .c. present value of the lease payments plus the present value of any unguaranteed residual value. d. carrying value of the asset on the lessor's books

A

When lessors account for residual values related to leased assets, they a. include the residual value in the receivable measurement 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. reduce the residual value by the executory costs.

A

Which of the following best describes current practice in accounting for leases? a. Leases are not capitalized. b. All long-term leases are capitalized. c. Leases similar to installment purchases are capitalized. d. All leases are capitalized.

B

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. assets are depreciated by the lessor.

C

In an operating lease, the lessee records a. amortization expense. b. interest expense. c. lease expense. d. amortization expense and lease expense.

C

The Lease Liability account should be disclosed asa. a current liability .b. a noncurrent liability. c. current portions in current liabilities and the remainder in noncurrent liabilities. d. deferred credits.

C

The basic 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 profit on the sale. d. allocation of initial direct costs by the lessor to periods benefited by the lease arrangements.

C

Which of the following is a correct statement of one of the classification tests? 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 lease payments (excluding executory costs) equal or exceed 90% of the fair value of the leased property.

C