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
