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
