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Manal Elkhoshkhany
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1. The lease term includes the fixed noncancelable term of

Resolved Question:

1. The lease term includes the fixed noncancelable term of the lease plus:
a) any periods covered by an ordinary renewal option during which a guarantee by the lessee of the lessor's debt related to the leased property is expected to be in effect
b) any periods covered by a bargain renewal option
c) any periods for which failure to renew the lease imposes a significant penalty on the lessee
d) all of these

2. If a lease qualifies as a capital lease, which of the following combinations of payments would be included?
a) minimum periodic rental payments plus executory costs
b) minimum periodic rental payments plus the payment required for a bargain purchase option
c) minimum periodic rental payments minus any payment required for a guarantee of the residual value
d) minimum periodic rental payments minus any payments required for failure to renew or extend the lease

3. The lessee should classify a noncancelable long-term lease as a capital lease if:
a) there is a purchase option at the end of the lease term
b) the present value of the minimum lease payments is at least 75% of the fair value of the leased property
c) the present value of the minimum lease payments is at least 90% of the fair market value of the leased property to the lessor
d)the estimated residual value of the leased property at the termination of the lease is equal to 90% of the lessee's guaranteed residual value

4. When a lessee makes periodic cash payments for a capital lease, which of the following accounts is increased?
a) Lease Rental Expense
c) Leased Equipment
d) Capital Lease Obligation
e) Interest Expense

5. Which of the following statements regarding the calculation of the lessee's depreciation expense for a capital lease is true?
a)The bargain purchase option price is deducted from the original cost capitalized, and the difference is allocated over the estimated economic life of the asset.
b) The guaranteed residual value is deducted from the original cost capitalized, and the difference is allocated over the estimated economic life of the asset.
c) The unguaranteed residual value is deducted from the original cost capitalized, and the difference is allocated over the term of the lease.
d) The guaranteed residual value is deducted from the original cost capitalized, and the difference is allocated over the term of the lease.

6. An operating lease should be recorded in the lessee's accounts at the inception of the lease at an amount equal to:
a) the present value of the minimum lease payments less the executory costs included in the minimum lease payments
b)the total value of the future rental payments less any estimated contingent payments
c) the total value of the future rental payments less any executory payments included in the future payments
d)none of these

7. For a sales-type lease, cost of goods sold is valued by the lessor at:
a) the recorded cost assigned to the inventory less the present value of the guaranteed residual value of the leased property accruing to the benefit of the lessor
b) the recorded cost assigned to the inventory less the undiscounted value of the unguaranteed residual value of the leased property accruing to the benefit of the lessor
c) the recorded cost assigned to the inventory less the present value of the unguaranteed residual value of the leased property accruing to the benefit of the lessor
d) the recorded cost assigned to the inventory less the undiscounted value of the guaranteed residual value of the leased property accruing to the benefit of the lessor

8. A direct financing lease differs from a sales-type lease in that:
a) the direct financing lease does not have a dealer profit, although it may have a dealer loss
b)the direct financing lease provisions cannot include a bargain purchase option
c)the sales-type lease does not have unearned interest income at the inception of the lease
d)the direct financing lease does not have a dealer profit or loss

9. Dillon Co., a lessor, signed a direct financing lease on January 1. The cost and fair value of the machine that was leased was $60,000. The implicit interest rate was 6%. The lease period was seven years, with the first payment due immediately. Actuarial information for 6% follows:

6 Years 7 Years 8 Years
Present value of ordinary annuity of $1 4.91732 5.58238 6.20979

What is the annual lease payment to be collected by Dillon?:
a) $8,571.43
b) $9,115.25
c)$10,139.72
d)$11,516.78
10. FASB’s rules concerning leases are an attempt to record in the financial statements:
a) the risks and benefits of being a lessee
b) the risks and benefits of being a lessor
c) the risks and benefits of leasing an asset
d) the risks and benefits of asset ownership
Submitted: 3 years ago.
Category: Finance
Expert:  Manal Elkhoshkhany replied 3 years ago.

Hello camaleon

 

Thank you for requesting me, but for future posts, please type "For BusinessTutor" at the beginning of the post and try to allow me at least 48 hours before the deadline. For timed assignments, just send me a message 48 hours ahead and quote the day & time you want me to meet you here and I will

 

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All the best

Manal Elkhoshkhany, Tutor
Category: Finance
Satisfied Customers: 9467
Experience: More than 5000 online tutoring sessions.
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