Financial Accounting
9th Edition
ISBN: 9781259222139
Author: Robert Libby, Patricia Libby, Frank Hodge Ch
Publisher: McGraw-Hill Education
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Chapter S, Problem 2MCQ
To determine
Find the correct option, the option which describes a capital lease.
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A lease agreement whereby the lessee recognized rent expense which is always equal to the rent income recognized by the lessor at a given period of time.
Group of answer choices Terminating lease Operating lease Finance lease Sale type lease
A lease agreement whereby the lessee recognized rent expense which is always equals to the rent income recognized by the lessor at a given period of time.
A. Operating lease
B. Finance lease
C Terminating lease
D. Sale type lease
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.
Chapter S Solutions
Financial Accounting
Ch. S - Defining a Lessor Which of the following best...Ch. S - Prob. 2MCQCh. S - Prob. 3MCQCh. S - Prob. 4MCQCh. S - Prob. 5MCQCh. S - Prob. 6MCQCh. S - Prob. 1MECh. S - Prob. 2MECh. S - Prob. 3MECh. S - Prob. 4ME
Ch. S - Prob. 1ECh. S - Prob. 2ECh. S - Prob. 3ECh. S - Prob. 4ECh. S - Calculating a Deferred Tax Liability LOS-5 On...Ch. S - Prob. 6ECh. S - Prob. 7ECh. S - Prob. 8ECh. S - Prob. 9ECh. S - Prob. 10ECh. S - Converting Operating Leases to Capital Leases...Ch. S - Converting Operating Leases to Capital Leases...Ch. S - Computing Effective Tax Rates LOS-4 Below is...Ch. S - Prob. 4PCh. S - Prob. 5PCh. S - Prob. 6PCh. S - Analyzing Starbuckss Lease Disclosures The...Ch. S - Analyzing Disneys Income Tax Disclosures The...
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- 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 onlyarrow_forwardPart 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.arrow_forwardThe 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 objectivearrow_forward
- The following are some of the characteristics of an asset available for lease. (Click the icon to view the lease characteristics.) Required a. Determine the amount of lease payment that the lessor would require to lease the asset. b. Compute the lessor's net investment in the lease at initial recognition. c. Compute the value of the lessee's ROU asset at initial recognition. d. Compute the lessee's lease liability at initial recognition. Requirement a. Determine the amount of lease payment that the lessor would require to lease the asset. Begin by calculating the present value of the residual value and the value to be recovered by the lessor from the annual lease payments. (Use a financial calculator for all present value computations. Enter your final answers as positive amounts rounded to the nearest whole dollar.) Present value of guaranteed residual value Value to be recovered by annual lease payments Determine the amount of lease payment that the lessor would require to lease the…arrow_forwardPart 1: Finance leases and operating leases are the two classifications of leases described in FASB pronouncements from the standpoint of the lessee. Instructions a. Describe how a finance lease would be accounted for by the lessee both at the commencement of the lease and during the first year of the lease, assuming the lease transfers ownership of the property to the lessee by the end of the lease. b. Describe how an operating lease would be accounted for by the lessee both at the commencement of the lease and during the first year of the lease, assuming equal monthly payments are made by the lessee at the beginning of each month of the lease. Do not discuss the criteria for distinguishing between finance leases and operating leases. Part 2: Sales-type leases and operating leases are two of the classifications of leases described in FASB pronouncements from the standpoint of the lessor. Instructions Compare and contrast a sales-type lease with an operating lease as follows. a.…arrow_forwardWhen a lease qualifies as a finance lease, what amount is initially recorded as the cost of the right-of-use asset? A) The present value of the lease payments B) The sum of the gross (undiscounted) lease payments. O A O B « Previous Next Not saved Submit Quizarrow_forward
- Under IFRS 16, lessors are required to account for lease receipts from operation leases as a. Income, on a straight-line basis over the lease term b. Revenue, on a reducing balance basis over the lease term c. Revenue, at the end of lease term d. Income, on inception date of the leasearrow_forwardThe following are some of the characteristics of an asset available for lease. E (Click the icon to view the lease characteristics.) Required a. Determine the amount of lease payment that the lessor would require to lease the asset. b. Compute the lessor's net investment in the lease at initial recognition. Lease characteristics c. Compute the value of the lessee's ROU asset at initial recognition. d. Compute the lessee's lease liability at initial recognition. Fair value of leased asset $ 115,000 Lease term 7 years Payment frequency Annual Requirement a. Determine the amount of lease payment that the lessor would require to lease the asset. Payment timing Beginning of year Begin by calculating the present value of the residual value and the value to be recovered by the lessor from the annual lease payments. (Use the nearest whole dollar.) s rounded to Guaranteed residual value $ 19,000 Amount expected to be paid out under the guaranteed residual Present value of guaranteed residual…arrow_forwardIn an operating lease, the: Multiple Choice lessor records interest revenue. lessee records an asset and a liability for the present value of lease payments. lessor records a receivable for the present value of lease payments. lessee records an asset and a liability for the total of the lease payments.arrow_forward
- Which of the following is a TRUE statement? Oa The Lessee recognizes a single Lease Expense on the Income Statement for a Finance Type Lease. Ob Under an Operating Lease, the Lessor records each Lease Payment Receipt as part Interest Revenue and part Lease Revenue. Oc Under an Operating Lease, the Lessot reports a Lease Receivable Asset on their Balance Sheet equal to the presernt value of Lease payments plus the present value of a Rem d A Lessee reports Interest Expense on a Finance Lease but not on an Operating Lease. Oe. Both a Guaranteed and Unguaranteed Residual Value affect the Lessee's computation of amounts capitalized as a Leased Assetarrow_forwardInitially, a lease liability is measured a. by the lessee at the present value of the lease payments that are not paid at the commencement date of the lease. b. by the lessor at the present value of the total lease payments payable at the commencement date of the lease. c. by the lessor at the total cost of the right-of-use asset. d. by the lessee at the total cost of the right-of-use asset.arrow_forwardWhich of the following statements is correct in accordance with AASB 16 Leases? Group of answer choices A lease contract, or part of a lease contract, conveys the right to transfer ownership of an asset for a period of time in exchange for consideration. Payments that are made by a lessee at commencement date are included in the initial amount recognised for the lease liability. Payment for executory costs reimbursed by the lessee after being paid by the lessor on behalf of the lessee are included in the calculation of lease payments. Variable lease payments may be increased or decreased during the lease term because of changes in facts and circumstances occurring after the asset is made available to the lessee to use, other than the passage of time.arrow_forward
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