Chapter 15: Leases

Match each lease with its description.

Operating - Rights and risk of ownership are retained by the lessor. Capital - Rights and risks of ownership are transferred to the lessee.

Which of the following occur in a lease? a) Contractual agreement. b) Lessee has the right to use an asset for a specified period of time. c) Lessee owns the asset at completion of payments. d) Lessee pays the lessor periodic cash payments.

a) Contractual agreement. b) Lessee has the right to use an asset for a specified period of time. d) Lessee pays the lessor periodic cash payments.

In an operating lease, periodic rental payments are a) recorded as rent expense by the lessee. b) recorded as rent revenue by the lessor. c) capitalized by the lessor. d) capitalized by the lessee.

a) recorded as rent expense by the lessee. b) recorded as rent revenue by the lessor.

Who owns the asset in an operating lease? a) Lessee b) Lessor

b) Lessor

A _____ _____ _____ is a provision in a lease contract that gives the lessee the option of buying the leased property at a price significantly lower than the expected fair value of the property at the end of the lease term.

bargain purchase option

The estimated time an asset is expected to be usable with normal maintenance and repairs is a) the fiscal life of the asset b) the extended life of the asset c) the economic life of the asset

c) the economic life of the asset

A(n) _____ lease is formulated as a lease, but is essentially an installment purchase.

capital