ch 15 vocab
The primary motivation for the new accounting guidance on leases was to
deter the use of off-balance-sheet financing.
From an accounting standpoint, legal ownership of a leased asset is _____ to the accounting method used.
irrelevant
On January 1, Warren Corporation leases equipment from Best Lease Co. Best Lease Co. purchased the equipment from Electronics Plus at a cost of $500,000. The lease agreement specifies three annual payments of $100,000 beginning at the inception of the lease. The useful life of the asset is estimated to be five years, but Warren will lease the asset for a total of three years. The present value of the three lease payments is $273,554. At the inception of the lease Best Lease Co. should
no entry to remove the asset from the balance sheet
When recording a finance lease, the amount initially recognized for the right-of-use asset is the
present value of the lease payments
Off-balance-sheet financing refers to the practice of
structuring transactions to keep assets and liabilities off the balance sheet by leasing rather than buying them.
Which of the following was not a criteria used to determine if a lease was a capital lease for the lessee under preexisting GAAP?
The lease term is for the major part of the remaining economic life of the leased asset.
Which of the following amounts represents the cost of goods sold in a sales-type lease?
The lessor's cost of the leased asset
Which of the following amounts represents the selling price in a sales-type lease?
The present value of the lease payments
The rights granted to a lessee under a finance lease ________ the same as those granted to a company that purchases an asset.
are not
Periods covered by renewal options
are not included in the lease term if a bargain purchase option is present.
Which of the following best describes the period over which the right-of-use asset is amortized when ownership transfers at the end of the lease?
its useful life -if ownership did not transfer then you would amortize over the lease term
