Company A leases computer servers to Company B for five years. At the end of the five years, Company B will assume ownership of the servers. Company B will then send the servers to one of their international locations. Which finance lease classification test does the scenario represent? O Alternative use O Transfer of ownership O Lease term O Purchase option.

Company A leases computer servers to Company B for five years. At the end of the five years, Company B will assume ownership of the servers. Company B will then send the servers to one of their international locations. Which finance lease classification test does the scenario represent? O Alternative use O Transfer of ownership O Lease term O Purchase option.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

H2.
Billy Limited (lessee) and Bob Limited (lessor) enter into a finance lease agreement on 1 July 2022 with the following terms: ⚫ lease term is 4 years • estimated economic life of the leased asset is 6 years 4 × annual rental payments of $15,000 each payable in arrears ⚫ residual value at the end of the lease term is not guaranteed to be $20,000 ⚫ esitmated fair value of the leased asset at the end of the lease term to be $18,000 ⚫ interest rate implicit in the lease is 8%. Billy Ltd intends to return the asset to Bob Ltd at the end of lease term Required: What is the initial lease liability that Billy Ltd needs to recognise at the lease commencement date? $49 682 $64 383 $62 912 $51 152
John Limited leses an asset from Smith Limited. The lease agreement has the following terms: lease term is 3 years estimated economic life of the leased asset is 6 years 3 x annual rental payments of $24 000 each payment is one year in arrears İncluded in the amount of annual rental payments is an amount of $1 000 to cover repairs and maintenance of the leased asset residual value at the end of the lease term is not guaranteed by the lessee John Ltd incurs initial direct costs of $500 interest rate implicit in the lease is 7% At the commencement of the lease, the amount of lease liability would be measured as: Group of answer choices $60 359. $62 983 $60 859 $64 584
Please answer both Part 1 and Part 2 questions for Case Study. Thank you. (additional reference from professor: please check the most updated ASC 842 leases) Case 13-8 Sale and Leaseback Part I Lessee Obtains Control Prior to Lease Commencement Phoenix Company wishes to lease a new vehicle for five years. The vehicle manufacturer is not willing to enter into lease arrangements, so Phoenix Company identifies a bank that is willing to purchase the vehicle and enter into a lease under an agreement that Phoenix Company expects to classify as an operating lease. Phoenix Company purchases the vehicle from the manufacturer, takes possession, and obtains legal title. Shortly thereafter, Phoenix Company sells the vehicle to the bank. The sale agreement requires the bank to reimburse Phoenix Company for all costs incurred to acquire the vehicle from the manufacturer and provides the bank with legal title to the vehicle. Concurrent with the sale, Phoenix Company and the bank enter into a…
18. Which of the following lease conditions would result in a finance lease to the lessee? a.The fair market value of the property at the inception of the lease is $18,000; the present value of the minimum lease payments is $16,000. b.The lease term is 70% of the property's economic life. c.The lessee will return the property to the lessor at the end of the lease term. d.The lessee can purchase the property for $1 at the end of the lease term.
only typed solution
What is the bargain purchase option in a lease agreement? B) what is 75% rule in leased assets? C) what is 90% rule in leased assets?
H1.
Recording Entries for Sales-Type Lease: Lease Payment Calculation Alessor entered into a 5-year lease appropriately classified as a sales-type lease. The cost of the underlying asset was $120,000 and the fair value of the asset was $150,000. The lease included a purchase option that allowed the lessee to purchase the underlying asset for $15,000 at the end of the lease. Because of the discount offered in the purchase option from the expected residual value of $21,000, the lessor is reasonably certain that the lessee will exercise the purchase option. The first lease payment will be made immediately, with annual payments due throughout the lease term. Note: Round each answer to the nearest whole dollar. a. Assuming that the lessor had a desired rate of return of 6%, compute the annual lease payment. 05 b. Assume the same facts (original scenario) except that the exercise of the option is not reasonably certain. Compute the annual lease payment. C. Assume the same facts (original…
TB MC Qu. 15-72 (Static) XYZ Company leased equipment... XYZ Company leased equipment to West Corporation under a lease agreement that qualifies as a finance lease to West, but not as a result of a bargain purchase option or a title transfer. The present value of the lease payments is $600,000. The expected economic life of the asset is seven years. The lease term is five years. Using the straight-line method, what would West record as annual amortization? Multiple Choice О $120,000 О $85,714 $60,000 $0
N2. Account
Keeping in view the IAS-17, classify the following transactions with reasons into operating lease or finance lease: LB Limited has obtained a generator for official lease for 2 year period whose useful life is 5 years. The C Ltd. has acquired an asset on lease the ownership of which will be transferred to the company at the end of lease term. iii.The D Itd. has acquired an asset on lease with an option to buy it at the end of lease term at scrap value. iv.The Z Ltd. has acquired an asset on lease for 9 years. The economic life of the asset is 10 years. The company has no intention to purchase it at the end of lease term. vX Ltd. has acquired an asset with annual lease payment of Rs. 50,000 for ten years whereas the fair value of the asset is Rs. 210,000