Explain which of following would result in the lessee classifying the lease as a finance lease. a. The lease is for a major part of the economic life of the asset. b. The lease term is for 12 months or less. c. The lease transfers ownership of the asset at the end of the lease.

Explain which of following would result in the lessee classifying the lease as a finance lease. a. The lease is for a major part of the economic life of the asset. b. The lease term is for 12 months or less. c. The lease transfers ownership of the asset at the end of the lease.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: A lease agreement whereby the lessee recognized rent expense which is always equal to the rent…

A: Lease is an agreement between two parties whereby one party gives its asset for use to other party…

Q: Annual Lease ayment Plus GRV 0 101571 LA $ Lease Amortization Schedule Interest on Liability 0 $…

A: Annual lease payment on a lease has both interest payment and a portion of lease liability.

Q: D

A: The objective of the question is to calculate the annual lease payments and the amount the lessee…

Q: At its inception, the lease term of Lease G is 50% of the estimated remaining economic life of the…

A: The practice of documenting and summarizing financial transactions connected to a lease agreement…

Q: Each period of a finance lease, the lessee records a lease expense that includes which of the…

A: The objective of the question is to identify the components that are included in the lease expense…

Q: Need answer for all the Question

A: Step 1:Unrealized gain: The unrealized gain is the difference between the selling price and the cost…

Q: uestion: True or False

A: Step 1 In lease accounting, in any model adopted by the lesser or lessee for its accounting of…

Q: the year when payment is made in advanced shall be: O Lease liability at inception of the lease…

A: lease is a contract that outline the term under which one party agree to when can a asset to another…

Q: Which of the following is NOT a correct statement of one of the lease classification test for the…

A: A lease is a contractual agreement between a lessor (owner of an asset) and a lessee (user of the…

Q: Lease 1 does not contain a bargain purchase option, but the lease term is equal to 90 percent of the…

A: A lease is defined as a contractual agreement incorporated between two business entities where one…

Q: If, as part of the accounting for a lease, the lessee debits an asset and credits a liability,…

A: Assets have debit balance while liabilities and equity have credit balance. A lease is a contractual…

Q: Under IFRS: lessees and lessors recognize right-of-use assets. lessees always use the operating…

A: The correct answer is “lessors do not distinguish between sales-type and direct financing lease”.

Q: For each of the three independent situations below determine the amount of the annual lease…

A: A lease is defined as a contractual agreement incorporated between two business entities where one…

Q: At the beginning of a Type B lease, the lessor will record what asset and liability, if any?

A: Lease:An agreement of contract that is made to transfer the right to utlize the resources for a…

Q: Each of the four independent situations below describes a finance lease in which annual lease…

A: The lease accounting refers to the process of reporting and recording the financial transactions…

Q: Solving this problem

A: Step 1: Define Lessee Accounting:A lessee utilizes present and/or future value tables to help…

Q: Which of the following is a criterion for a lease to be classified as a finance lease in the books…

A: A lease is a contract in which a landlord (the lessor) offers the tenant (the lessee) the right to…

Q: lease and an estimated useful life of 12 years. The present value of the minimum lease payment is…

A: Right of use Asset It is a lessee's right to use an asset during the life of a lease. It is the…

Q: Each of the four independent situations below describes a sales-type lease in which annual lease…

A: Lease refers to the contract that is made between the lessor and the lessee for providing an asset…

Q: Which of the following is not correct statement for accounting by the lessee? O a. The lessee…

A: The incorrect Statement for accounting by lessee is "The operating lease method is used to account…

Q: In a lease that is recorded as a manufacturer's lease or dealer's lease by the lessor, interest…

A: A manufacturer/dealer lessor is a lessor that either manufactures the leased asset or acquires the…

Q: indicate whether the company has entered into a finance lease oran operating lease. The lessor…

A: Lease: Lease is a contractual agreement whereby the right to use an asset for a particular period of…

Q: Which one of the following definitions is/are correct? I. A lease between a lessor and the…

A: 1) Incorrect: Direct lease is the lease between manufacture or dealer(which is lessor) and user…

Q: Generally operating leases are fully amortized, and the lease is written for the expected life of…

A: An operating lease is a contract that allows for the use of an asset but does not convey rights of…

Q: The discount rate influences virtually every amount reported in connection with a lease by both the…

A: The lessor’s discount rate is the effective interest rate when determining the present value of…

Q: ginning of the period. Use this information to determine the amount at wl fon will initially be…

A: lease payments are to be recorded as present value of all lease payments.

Q: When a lease qualifies as a finance lease, what amount is initially recorded as the cost of the…

A: Solution Concept In case of finance lease , The initial cost of right of use asset include…

Q: At the beginning of a Type B lease, the lessee will record what asset and liability, if any?

A: Type B lease implies to the lease in which insignificant portion of the useful life of the asset is…

Q: On the balance sheet, the lease liability is measured as ________. Group of answer choices the…

A: The objective of the question is to identify how the lease liability is measured on the balance…

Q: lease i

A: A finance lease is a type of lease agreement in which a finance company is typically the legal owner…

Q: For each of the three independent situations below determine the amount of the annual lease…

A: Situation 1Situation 2Situation 3 19,403.00 113,487.00 87,735.00 Please see the working…

Q: Which one of the following is an indicator that a lease is an operating lease for accounting…

A: Option 1: This option is incorrect because if the lease transfers ownership of the asset to the…

Q: For each of the three independent situations below determine the amount of the annual lease…

A: A lease is a legal agreement between two parties, Under the lease one party provides the asset with…

Q: The following facts pertain to a non-cancelable lease agreement between Sage Hill Leasing Company…

A: Lease is a contract between two parties in which one party is authorized to use the assets. The…

Q: A six-year lease can be renewed for two additional three-year periods, and it also can be terminated…

A: Sometimes actual term of lease is uncertain. A six-year lease can be renewed for two additional…

Q: Explain how the lease liability and a right-of-use asset would be recognised and measured at the…

A: Lease is an arrangement in which one party uses the assets and pays lease payment to the other…

Q: C) What expenses related to this lease will Evans incur during the first year of the lease, and how…

A: Lease: Lease is a contractual agreement whereby the right to use an asset for a particular period of…

Q: ow will a 20-year lease obligation appear on the lessee's statement of financial position? a.as a…

A: Financial lease is that lease where lessor has given right to use the assets to lessee which cover…

Q: Which of the following is a criterion for classifying a lease as a finance lease by the lessee?

A: The correct answer is: (A) The lease term is equal to 75% or more of the estimated economic life of…

Q: How do the lessee and lessor will agree to modify the terms of a lease before the lease term ends?

A: Lease Agreement: It is a contract between the owner of an asset (lessor) and a tenant (lessee) for…

Concept explainers

Leasing

Leasing is a contractual arrangement in which someone (a lessee) pays the owner (or lessor) of a building, land, vehicle, or other asset for the use of that asset. The lease is the agreement between lessee and lessor.

Question

Explain which of following would result in the lessee classifying the lease as a finance lease.

a. The lease is for a major part of the economic life of the asset.

b. The lease term is for 12 months or less.

c. The lease transfers ownership of the asset at the end of the lease.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step 3

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

A lease qualifies as a finance (sales-type) lease. Indicate an account to be used by the lessee, and an account to be used by the lessor Select one: Account to be used by the lessee Right of Use Asset Account to be used by the lessor Lease Receivable a. Ob. Account to be used by the lessee Unearned Revenue Account to be used by the lessor Sales Revenue Account to be used by the lessee Lease Expense Account to be used by the lessor Interest Revenue d. Account to be used by the lesseO Lease Liability Account to be used by the lessor Amortization Expense Account to be used by the lessee Amortization Expense Account to be used by the lessor Interest Expense e.
A lease agreement whereby the lessor shall recognized gross profit at inception of the lease? a. Multi-agreement lease b. Direct finance lease c. Operating lease d. Dealers lease
For which of the following conditions will the lessor classify a lease as a sales-type lease? a.The leased asset may be exchanged for a similar asset during the lease term. b.The present value of the sum of the lease payments is equal to or more than the fair value of the underlying asset. c.The lease term is less than one year. d.The lease term is half of the underlying asset’s economic life.
The objective of IAS 17 Leases is to prescribe the appropriate accounting treatment and required disclosures in relation to leases. Which TWO of the following situations would normally lead to a lease being classified as a finance lease? (1) The lease transfers ownership of the asset to the lessee by the end of the lease term. (ii) The lease term is for approximately half of the economic life of the asset. (iii) The lease assets are of a specialised nature such that only the lessee can use them without major modifications being made. (iv) At the inception of the lease, the present value of the minimum lease payments is 60% of what the leased asset would cost to purchase. Select one: O a. (ii) and (iii) O b. (i) and (iii) c. (i) and (ii) O d. (iii) and (iv)
Among the four types of leases: Lessor’s sales-type lease, Lessor’s operating lease Lessee’s finance lease, Lessee’s operating lease Which type(s) of lease will record Lease Liability upon the inception of the lease? Enter the number that represents the correct answer. Lessee’s finance lease, Lessee’s operating lease, and Lessor’s sales-type lease Lessee’s finance lease and Lessee’s operating lease Lessee’s finance lease only Lessee’s operating lease only
question 1: There are nine itsms list under "quantitive disclosure" for the lease. Why aren't short-term lease cost and variable lease cost shown? question 2 : What is the amount cintractual obligations and options that the lessee is reasonably certain to excercise for Operating lease? financing lease?
am. 104.
The following information is provided for an equipment leased by Lessee from Lessor. Lessee and Lessor both use IFRS. Inception Date of Lease Annual Lease Payment (Due: Beginning of Year, Starting Jan 1, 2020) Purchase option at of Lease Term (Certain to be exercised by Lessee) Lease Term Economic Life of Leased Equipment Lessor's Cost Fair Value of Asset Lessor's implicit rate Lessee's incremental borrowing rate Salvage value at the end of economic life) Select one: True O False Unearned Interest Income 30,858 ÷ January 01,2020 Sales 22,642 = 21,500 The lessor will most likely classify this as Sales Type Lease. Cost of Goods Sold 3,000 7 years 10 years Lessor will record the following at the beginning of the Lease term: Lease Receivable 122,642 ÷ 98,114 Same as present value of all future payments. 8%, known to Lessee Known to Lessee 7% 0 Time
A.4.
The lease transfers ownership of the property to the lessee at the end of the lease term Select one: a. Capital lease O b. operating lease c. direct lease O d. often objective
For accounting purposes, which one of the following conditions would automatically cause a lease to be classified as a capital lease? Multiple Choice O O O The lessee can purchase the asset at fair market value at the end of the lease. The lease transfers ownership of the asset to the lessee by the end of the lease term. The lease term equals 60 percent or more of the asset's estimated economic life. The present value of the lease payments equals 75 percent of the asset's fair market value at lease inception. The lessor can renew the lease at the end of the lease term.