Lease 1 does not contain a bargain purchase option, but the lease term is equal to 90 percent of the estimated economic life of the leased property. Lease 2 does not transfer ownership of the property to the lessee by the end of the lease term, but the lease term is equal to 75 percent of the estimated economic life of the leased property. How should the lessee classify these leases? Lease 1 1. Operating lease 2. Operating lease 3. Finance lease 4. Finance lease. 03 02 01 4 Lease 2 Finance lease Operating lease Finance lease Operating lease

Lease 1 does not contain a bargain purchase option, but the lease term is equal to 90 percent of the estimated economic life of the leased property. Lease 2 does not transfer ownership of the property to the lessee by the end of the lease term, but the lease term is equal to 75 percent of the estimated economic life of the leased property. How should the lessee classify these leases? Lease 1 1. Operating lease 2. Operating lease 3. Finance lease 4. Finance lease. 03 02 01 4 Lease 2 Finance lease Operating lease Finance lease Operating lease

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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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
Lease A does not contain a bargain purchase option, but the lease term is equal to 90 percent of the estimated economic life of the leased property. Lease B does not transfer ownership of the property to the lessee by the end of the lease term, but the lease term is equal to 75 percent of the estimated economic life of the leased property. How should the lessee classify these leases under U.S. GAAP? Lease A Lease B A.) Operating lease Capital lease B.) Operating lease Operating lease C.) Capital lease Capital lease D.) Capital lease Operating lease
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?
How should an entity account for a short-term or low-value lease under PFRS 16? Group of answer choices Recognize an discounted present value of future payments. On a straight-line basis unless the use of the asset allows for a more appropriate treatment. Recognize the expense as it is paid. The same treatment as long-term leases
The five criteria of lease classification in US GAAP do not include: A) The agreement specifies that ownership transfers at the end of the lease term. B) The present value of the lease payments exceeds half of the fair value of the asset C) The agreement grants the lessee an option to purchase the underlying asset that the lessee is reasonably certain to exercise. D) The lease term is for the major part of the remaining economic life of the underlying asset. O A O B O D
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
Part 1: New Lease Accounting – using IFRS 16 Leases Effect Analysis. Which payments are to be included in the measurement of lease assets and lease liabilities? Also, discuss the pros and cons of excluding the following payments from the measurement. - Variable lease payments linked to future use or sales - Optional payments relating to lease-extension option when a lessee is not reasonably certain to exercise the option.
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.
PROBLEM 1: TRUE OR FALSE 1. According to PFRS 16 Leases, a lessee shall classify each of its leases into a finance lease or an operating lease. 2. A contract is (or contains) a lease if it conveys the right to control the use an identified asset for a period of time in exchange for consideration. 3. An underlying asset is not considered an identified asset for the purpose of applying the accounting requirements of PFRS 16 if the supplier's substitution right is not substantive. 4. The current view on accounting for leases by lessees is that all leases are 'on-balance sheet' items, with very minimal exceptions. 5. In most leases, a lessee recognizes an asset and a liability at the commencement date. 6. According to PFRS 16, lease payments include any amount to be paid for purchase options that are reasonably certain to be exercised and amounts that are expected to be paid under residual value guarantees. 7. The lessee always uses its incremental borrowing rate in determining the present…