ACCT Final

Which of the following is not one of the lease classification tests? Lease term Purchase option Collectibility Transfer of ownership

Collectibility

Lease payments include:I. fixed payments.II. variable payments based on an index.III. a bargain purchase option.IV. a guaranteed residual value.

I, II, III, and IV.

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.

I, II, and IV.

Which of the following describes the lease term test? If there is a bargain purchase option during the lease term, it is a finance lease. If the asset has an alternative use during the lease term, it is a finance lease. If the lease term is 75% or more of the economic life, it is a finance lease. If the lease term is 90% or more of the economic life, it is a finance lease.

If the lease term is 75% or more of the economic life, it is a finance lease.

Which of the following is a correct statement of one of the classification tests? The lease payments (excluding executory costs) equal or exceed 90% of the fair value of the leased property. The lease term is equal to or more than 75% of the estimated economic life of the leased property. The lease contains a purchase option. The lease transfers ownership of the property to the lessor.

The lease term is equal to or more than 75% of the estimated economic life of the leased property.

What impact does a bargain purchase option have on the present value of the lease payments computed by the lessee? The lessee must increase the present value of the lease payments by the present value of the option price. The lessee must decrease the present value of the lease payments by the present value of the option price. The lease payments would be increased by the option price. There is no impact as the option does not enter into the transaction until the end of the lease term.

The lessee must increase the present value of the lease payments by the present value of the option price.

In a finance lease, the lessee records interest expense only. lease expense only. amortization expense and interest expense. amortization expense only.

amortization expense and interest expense.

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

an operating lease.

The initial direct costs of leasing include lessor advertising costs. are generally borne by the lessee. are expensed in the period of the sale under a sales-type lease. include incremental costs.

are expensed in the period of the sale under a sales-type lease.

A lessee with a finance lease containing a bargain purchase option should depreciate the leased asset over the asset's remaining economic life. term of the lease. life of the asset or the term of the lease, whichever is shorter. life of the asset or the term of the lease, whichever is longer.

asset's remaining economic life.

In an operating lease, the lessee records amortization expense. lease expense. amortization expense and lease expense. interest expense.

lease expense.

The classifications of a lease by the lessee are operating and finance leases. operating, sales, and finance leases. operating and leveraged leases. None of these answers are correct.

operating and finance leases.

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

present value of the lease payments.

The basic difference between a direct-financing lease and a sales-type lease is the manner in which rental receipts are recorded as rental income. amount of the depreciation recorded each year by the lessor. recognition of the profit on the sale. allocation of initial direct costs by the lessor to periods benefited by the lease arrangements.

recognition of the profit on the sale.

The lease receivable amount includes the present value of rental payments plus the present value of the guaranteed residual value only. rental payments only. rental payments plus the present value of guaranteed and unguaranteed residual values. rental payments plus the present value of the unguaranteed residual value only.

rental payments plus the present value of guaranteed and unguaranteed residual values.

For a sales-type lease, assets are depreciated by the lessor. the gross profit will be the same whether the residual value is guaranteed or unguaranteed. the present value of the guaranteed residual value is deducted to determine the cost of goods sold. the sales price includes the present value of the unguaranteed residual value.

the gross profit will be the same whether the residual value is guaranteed or unguaranteed.

In computing the present value of the lease payments, the lessee should use the implicit rate in all cases. use its incremental borrowing rate in all cases. use both its incremental borrowing rate and the implicit rate of the lessor, assuming that the implicit rate is known to the lessee. use the implicit rate of the lessor, assuming that the implicit rate is known to the lessee.

use the implicit rate of the lessor, assuming that the implicit rate is known to the lessee.