Ch. 15 Work out

On January 1, 20X1, Tucker Company leases equipment from Franz Inc. over three years of the equipment's five-year estimated useful life. Franz acquired the asset for $431,213 and normally utilizes an 8% interest rate for these types of transactions. The present value of the lease payments is $357,710. The annual lease payment is $100,000; the first payment is due on January 1, 20X1. Tucker should recognize the second lease payment by debiting (round to the nearest whole dollar and select all that apply) Multiple select question. (a) interest expense for $28,617 (b) lease payable for $79,383 (c) lease payable for $71,383 (d) interest expense for $20,617

(b) lease payable for $79383 (d) interest expense for $20, 617 Calucate: ($357,710 - $100000)*.08

Which of the following were the criteria used to classify a capital lease under preexisting GAAP? (Select all that apply.) Multiple select question. The lease term is for 75% or more of the useful life of the leased asset. The lease term is for 90% or more of the useful life of the asset. Title to the property transfers at the end of the lease period. The present value of the minimum lease payments is 90% or more of the fair value of the leased asset. The lease term is for a "major part" of the remaining economic life of the asset. The lease contains a bargain purchase option. The present value of the sum of lease payments equals or exceeds substantially all of the fair value of the underlying asset.

The lease term is for 75% or more of the useful life of the leased asset. Title to the property transfers at the end of the lease period. The present value of the minimum lease payments is 90% or more of the fair value of the leased asset. The lease contains a bargain purchase option.

Which of the following occur in a sale-leaseback transaction? Multiple select question. The lessee pays periodic rental payments. The lessor receives cash from the sale of the asset. The lessee receives periodic rental income. The lessee receives cash from the sale of the asset.

The lessee pays periodic rental payments. The lessee receives cash from the sale of the asset.

The lease term includes

any periods covered by options to extend with significant incentive. the contractual term of the lease.

In a finance lease, the lessee reports the portion representing principal repayment as a cash outflow from

financing activities

A purchase option (Select all that apply) Multiple select question. gives the lessor the option to purchase the asset during the lease term or at the end of the lease. gives the lessee the option to purchase the asset during the lease term or at the end of the lease. does not include a specified exercise price. includes a specified exercise price.

gives the lessee the option to purchase the asset during the lease term or at the end of the lease. includes a specified exercise price.

In a finance lease, the lessee reports the interest portion of the payment as a cash outflow from

operating activities

Both lessor and lessee report cash payment for operating lease as a cash outflow from

operating activity

The lease term is typically considered to be

the contractual term of the lease plus any periods covered by options to extend if extension is reasonably certain to occur.

nonlease compnent

when the amount represents transfer of a good or service to the lessee.