Chapter 15

In an operating lease in which the asset's economic life and lease term are different...

The lessee amortizes the leased asset at an amount that increases each period

If it is "reasonably certain" that the lessee will exercise a purchase option...

(1) the lease is classified as a sales-type lease, (2) both the lessee and the lessor consider the exercise price of the option to be an additional cash payment, and (3) it's assumed that the lease term ends on the date that the option is expected to be exercised

"Small ticket leases" (leases that have a value of $5,000 or less) to apply the short-cut method that applies to leases of 12 months or less. Unlike GAAP, small ticket leases...

Can be accounted for by the short-cut method if using IFRS

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

In a ten-year finance lease, the portion of the annual lease payment in the lease's third year that represents interest is...

Less than in the second year

If a finance lease contains a bargain purchase option, the lessee should amortize the leased asset...

Over the economic life of the asset

Which of the following leases would least likely be classified as an operating lease by the lessee?

The agreement permits the lessee to buy the leased asset for one dollar at the end of the lease term

What is the economic life test?

The lease term is for the major part of the economic life of the asset

One criterion for an arrangement to constitute a lease is that we have an identified asset. What is required in order for a contract to contain an identified asset?

The property must be property, plant, or equipment (not inventory, intangibles, or natural resources)

The lessee considers a finance/sales-type lease to be...

a finance lease

What might shorten the term of the lease?

a purchase option

The lessor considers a finance/sales-type lease to be...

a sales-type lease

For a finance lease, an amount equal to the present value of the lease payments should be recorded by the lessee as...

an asset and a liability

For a contract to contain a lease, the asset must be...

explicitly or implicitly identified in the contract

In an annuity due, the first payment...

has no interest expense and reduces the lease liability

When the leaseback in a sale-leaseback transaction is an operating lease, the seller-lessee...

immediately recognizes any gain on the sale

By the lessor, a lessee-guaranteed residual value at the beginning of a finance lease should be...

included as part of lease payments at present value

What is one thing that a lessee would not record in connection with a lease?

lease revenue

For the lessor to consider the lease a sales-type lease...

one of the 5 classification criteria must be met

A lessee will reassess variable lease payments that depend on an index or a rate...

only when the lessee remeasures the right-of-use asset and lease liability for other reasons

Under IFRS, a lessee will reassess variable lease payments that depend on an index or a rate...

only when the lessee remeasures the right-of-use asset and lease liability for other reasons

What is one thing that a lessor would not record in connection with a lease?

right-of-use asset