Answered: 11. Which of the following is an…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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11. Which of the following is an appropriate journal entry for the initial recognition by a lessee of a finance lease arrangement?

Select one:

a.
DR
Leased asset
CR
Bank loan

b. DR
Cash
CR
Leased asset

c. DR
Leased liability
CR
Leased asset

d. DR
Leased asset
CR
Lease liability

12. The following lease details relate to a finance lease arrangement between Crebarn (the lessor) and Balwane (the lessee). The lease term is 3 years; 3 lease payments of $60,000 each are to be made annually in advance; a guaranteed residual of $40,000 is payable at the end of the lease term; the implicit interest rate is 13%. The present value of the lease liability is:

Select one:

a. $180,000.

b. $187,808;

c. $220,000;

d. $191,400;

13. The following information relates to a lease between Canneries Limited (lessor) and Fruiterers Limited (lessee). 3 lease payments of $20,000 each are made annually in advance and a final lease payment of $15,000 is made at the end of the 3 year lease term. The implicit interest rate is 10%. The amount of the interest expense that is recognised in the first year of the lease is:

Select one:

a. $15,402;

b. $7,500.

c. $4,598;

d. $6,598;

14. Which of the following is an appropriate journal entry for the initial recognition by a lessor of a finance lease arrangement?

Select one:

a. DR
Leased asset
CR
Cash/Accounts payable

b. DR
Leased asset
CR
Cash

c. DR
Lease receivable
CR
Asset

d. DR
Lease receivable
CR
Lease liability

16. A sale and leaseback transaction involves the sale of an asset that is then leased back to the

Select one:

a. lessor;

b. acquiring entity;

c. original owner;

d. purchaser.

17. Where a lessee does not expect to purchase a leased asset, the asset must be depreciated across:

Select one:

a. its useful life;

b. a period not exceeding 5 years;

c. the full economic life of the asset;

d. the shorter of the lease term or 20 years.

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