EBK INTERMEDIATE ACCOUNTING: REPORTING
2nd Edition
ISBN: 9781337268998
Author: PAGACH
Publisher: YUZU
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Chapter 20, Problem 8RE
a.
To determine
Identify whether the given lease qualifies as an operating lease, sales-type lease, or direct financing lease to lessor.
b.
To determine
Identify whether the given lease qualifies as an operating lease, sales-type lease, or direct financing lease to lessor.
c.
To determine
Identify whether the given lease qualifies as an operating lease, sales-type lease, or direct financing lease to lessor.
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Which of the following lease provisions would cause a lease to be classified as an operating lease?
Select one:
A. The collectability of lease payments by the lessor is unpredictable
B. The lease contains a bargain purchase option
C. The term of the lease is more than 75 percent of the estimated economic life of the leased property
D. The present value of the minimum lease payments equals or exceeds 90 percent of the fair value of the leased property
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
04
Lease 2
Finance lease
Operating lease
Finance lease
Operating lease
Which of the following is not one of the criteria for determining whether a lease is a finance lease?
A. The asset cost is greater than $100,000B. The lease grants the lessee an option to purchase the asset that the lessee is reasonably certain to exerciseC. The lease term is for the major part of the remaining economic life of the assetD. Alease that transdies ownership of the asset to the lessee by the end of the lease term
Chapter 20 Solutions
EBK INTERMEDIATE ACCOUNTING: REPORTING
Ch. 20 - Prob. 1GICh. 20 - What is the difference between the lessee and...Ch. 20 - Prob. 3GICh. 20 - Prob. 4GICh. 20 - Prob. 5GICh. 20 - Prob. 6GICh. 20 - What are the two types of lease classifications...Ch. 20 - Prob. 8GICh. 20 - Prob. 9GICh. 20 - Prob. 10GI
Ch. 20 - Prob. 11GICh. 20 - Describe the difference between how a lessee would...Ch. 20 - Prob. 13GICh. 20 - Prob. 14GICh. 20 - Prob. 15GICh. 20 - Prob. 16GICh. 20 - Prob. 17GICh. 20 - Prob. 18GICh. 20 - Prob. 19GICh. 20 - Prob. 20GICh. 20 - Prob. 21GICh. 20 - Prob. 1MCCh. 20 - Prob. 2MCCh. 20 - Prob. 3MCCh. 20 - Prob. 4MCCh. 20 - Prob. 5MCCh. 20 - Prob. 6MCCh. 20 - Prob. 7MCCh. 20 - Prob. 8MCCh. 20 - Rent received in advance by the lessor for an...Ch. 20 - Prob. 10MCCh. 20 - Next Level Keller Corporation (the lessee) entered...Ch. 20 - Prob. 2RECh. 20 - Prob. 3RECh. 20 - Prob. 4RECh. 20 - Prob. 5RECh. 20 - Prob. 6RECh. 20 - Prob. 7RECh. 20 - Prob. 8RECh. 20 - Prob. 9RECh. 20 - Prob. 10RECh. 20 - Prob. 1ECh. 20 - Prob. 2ECh. 20 - Lessee Accounting Issues Sax Company signs a lease...Ch. 20 - Prob. 4ECh. 20 - Prob. 5ECh. 20 - Prob. 6ECh. 20 - Prob. 7ECh. 20 - Lessor Accounting with Receipts at Beginning of...Ch. 20 - Determining Type of Lease and Subsequent...Ch. 20 - Prob. 10ECh. 20 - Prob. 11ECh. 20 - Prob. 12ECh. 20 - Prob. 13ECh. 20 - Prob. 14ECh. 20 - Prob. 15ECh. 20 - Determining Type of Lease and Subsequent...Ch. 20 - Prob. 2PCh. 20 - Prob. 3PCh. 20 - Lessee Accounting Issues Timmer Company signs a...Ch. 20 - Prob. 5PCh. 20 - Prob. 6PCh. 20 - Sales-Type Lease with Receipts at End of Year...Ch. 20 - Prob. 8PCh. 20 - Prob. 9PCh. 20 - Prob. 10PCh. 20 - Prob. 11PCh. 20 - Prob. 12PCh. 20 - Prob. 13PCh. 20 - Prob. 14PCh. 20 - Prob. 15PCh. 20 - Prob. 1CCh. 20 - Prob. 2CCh. 20 - Prob. 3CCh. 20 - Classification of Leases Part a. Capital leases...Ch. 20 - Prob. 5CCh. 20 - Prob. 6CCh. 20 - Prob. 7CCh. 20 - Prob. 8CCh. 20 - Prob. 9CCh. 20 - Prob. 10CCh. 20 - Prob. 11CCh. 20 - Prob. 12CCh. 20 - Prob. 13CCh. 20 - Prob. 14CCh. 20 - Prob. 15C
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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
- At its inception, the lease term of Lease G is 65% of the estimated remaining economic life of the leased property. This lease contains a purchase option that is reasonably expected to be exercised. The lessee should record Lease G as: a. neither an asset nor a liability b. an asset but not a liability c. an expense d. an asset and a liabilityarrow_forwardSubject:- accountingarrow_forwardE1.arrow_forward
- 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.arrow_forward9. Baa Co. enters into a lease of commercial space. The contract specifies a non-cancellable term of five years and a two-year, market-priced commencement, Baa Co. makes significant leasehold improvements with a useful life of ten years. Baa Co. determines that the economic benefits of the leasehold renewal option. Before the lease improvements can only be realized through continued of the leased property. At lease commencement, Occupancy b. 5 years c. 7 years d. 10 years a. 2 years Which of the following statements is incorrect regarding the accounting for lease liabilities? Lease liabilities are subsequently measured at amortized cost, adjusted for lease modifications and reassessments. b. Subsequent lease payments are apportioned to both the interest and the principal balance of the lease liability. c Periodic interests reflect a varying rate of interest on the remaining balance of the lease liability. d. Periodic interests reflect a constant rate of interest on the remaining…arrow_forwardLease 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 leasearrow_forward
- A lease agreement will qualify as a finance lease if one of these conditionsoccur: A. The lessee returns the leased property to the lessor at the end of the lease term.B. The lease does not have a bargain purchase option.C. The lease term is for major of the economic life of the asset.D. The present value of the minimum lease payment amounts to substantially less than the fair value of the leased asset.arrow_forwardWhich one of the following is an indicator that a lease is an operating lease for accounting purposes? Multiple Choice The lease transfers ownership of the asset to the lessee by the end of the lease term. The lessee will probably exercise the option to purchase the leased asset. The lease term represents a minor portion of the leased asset's economic life. The residual value plus the present value of the lease payments exceeds the value of the leased asset. The lessor has no use for the asset other than to lease it to the present lessee due to the specialized nature of that asset.arrow_forwardAll of the following would normally lead to a finance lease, except The lease transfer ownership of the asset to the lease at the end of the lease term. The present value of the minimum lease payments amounts to at least substantially all of the fair value of the asset at the inception of the lease. The lease term is for a major part of economic life of the asset even if the title is not transferred. The lessee has the option to purchase the asset at the price that is expected to be approximately equal to the fair value at exercise date.arrow_forward
- On the lessor’s accounting, which of the following situations would prima facie lead to a lease contract being classified as an operating lease? Lease term is for a major part of the asset’s useful life Existence of a bargain purchase option Present value of minimum lease payments is 50% of the fair value of the leased asset Transfer of ownership by end of lease termarrow_forwardWhich one of the following would normally lead to a lease being classified as an operating lease? a. The lease term is for a period of more than half of the expected economic life of the underlying asset. b. At the inception date of the lease agreement, the present value of the total lease payments is for an amount substantially less than the fair value of the underlying asset. c. The lease is cancellable, and all losses associated with the cancellation will be incurred by the lessee. d. It is reasonably certain at the inception date that the lessee will exercise an option to purchase the underlying asset at the end of the lease term for a price substantially lower than its expected fair value.arrow_forwardFor 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.arrow_forward
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