Which of the following statements is correct regarding the accounting for leases? Select the correct response: An entity can never be both a lessor and a lessee of a same leased asset The lessor depreciates the leased asset under a finance lease. When discounting lease payments the lessor and the lessee use the interest rate implicit in the lease. The lessee depreciates the leased asset under a "short-term" or a "low-valued asset" lease

Which of the following statements is correct regarding the accounting for leases? Select the correct response: An entity can never be both a lessor and a lessee of a same leased asset The lessor depreciates the leased asset under a finance lease. When discounting lease payments the lessor and the lessee use the interest rate implicit in the lease. The lessee depreciates the leased asset under a "short-term" or a "low-valued asset" 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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A lease transfers the right to use an identified asset for a period of time in exchange for rental payments. True False
1. Statement I. When the bargain purchase option was not exercised, the lessee should record a loss equivalent to the excess of the cost of the leased asset over the option price.Statement II. If there is a reasonable certainty that the lessee will obtain ownership by the end of the lease term, the leased asset should be depreciated the shorter between the lease term and the asset’s remaining useful life.Statement III. Assuming the lessee depreciates the asset under the straight-line method, the pattern of the total expense that the lessee shall recognized with respect to the lease is the same every period. A. Only Statement I and II are incorrect. B. Only Statement II and III are incorrect. C. Only Statement I and III are incorrect. D. All statements are incorrect. E. All statements are correct. 2. Statement I. If the pattern of the repairs cannot be established and the obligation for warranty cannot be reasonably estimated, warranty costs are recorded as expense when…
Under ASC 842 If the present value of the lease payments is less than or equal to the fair value of the asset the lessor must classify the lease as a direct financing lease. True False
What would be the advantages and disadvantages of leasing assets instead of owning them? How would the financial statements be different in a leasing situation (for both operating leases and finance leases) for the lessee? What about the lessor (including all of the types)? What disclosures should be made by lessees and lessors related to future lease payments?
In a finance lease by the lessee, the leased asset is depreciated on a systematic basis consistent with the depreciation policy of the lessee. If the the lease is only for a short term and of low value, and the lease contract did not mention as to the classification of such lease nor did it contain transfer of ownership and a reasonable certainty as to the purchase option's exercisability, depreciation by the lessee is a. Based on the useful life of the leased asset. b. Based on the lease term. c. Based on the shorter of the lease term or the useful life of the asset. d. Not recognized since the lease is an operating lease and the depreciation expense shall be shouldered by the lessor who retains ownership of the leased asset.
Compare the way a purchase option that is reasonably certain to be exercised and a lessee-guaranteed residual value are treated by the lessee and lessor when determining lease payments.
How do the lessee and lessor will agree to modify the terms of a lease before the lease term ends?
Which of the following is true about lease incentives?a. It forms part of the lease liability and right of use asset when the amount is actually receivedb. It forms part of the lease liability when the amount is still receivablec. It forms part of the lease liability and right of use asset when the amount is still receivabled. None of the choices
An increase in interest income recognized for the period on a lease agreement will have the effect of reducing the unearned revenue account for the lessor. Select one: True False
When a sale-leaseback transaction occurs, if the leaseback is considered to be an operating lease, and the lease payments and sales price are at fair value, any gain on the sale a. Is amortized over the lease term by a company using IFRS. b. Is recognized immediately by a company using IFRS. c. Is amortized over the lease term by a company using either U.S. GAAP or IFRS. d. Is not recorded by a company using IFRS.
Explain the differences in revenue recognition for the lessor in a sales-type lease, a direct financing lease, and an operating lease.
(48) If, as part of the accounting for a lease, the lessee debits an asset and credits a liability, then the lease must be a(n): A. Finance Lease B. Operating Lease C. Operating lease or finance lease D. none of the above