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) O c. (i) and (ii) O d. (iii) and (iv)

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) O c. (i) and (ii) O d. (iii) and (iv)

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter20: Accounting For Leases

Section: Chapter Questions

Problem 8MC: At its inception, the lease term of Lease G is 65% of the estimated remaining economic life of the...

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Which of the following is true regarding IFRS 16? a. Lessors shall recognize assets held under a contract of lease as a receivable at an amount equal to the net investment in the lease. b. Lessors shall recognize assets held under a contract of lease as a receivable at an amount equal to the cost of the asset which is the subject of the lease. c. Lessors shall recognize assets held under a finance lease as a receivable at an amount equal to the net investment in the lease. d. Lessors shall recognize assets held under a finance lease as a receivable at an amount equal to the cost of the asset which is the subject of the lease less any initial direct cost paid by the lessor.
Which of the following statements is correct related to lease? a. The leased asset is depreciated over the asset's useful life or lease term whichever is higher. b. The leased asset is depreciated over the asset's useful life. c. The leased asset is recorded using the higher amount between fair value of the asset and present value of the minimum lease payments. d. Under IFRS 16 a lease is defined as ‘a contract that conveys the right to use an asset for a period of time in exchange for consideration'.
Which of the following is a required financial statement presentation by a lessee for both capital leases and operating lease? A. Amortization Expense and Interest Expense B. Lease Expense C. Right-of-Use Asset and Lease Liability D. The reduction of the Lease Liability as a financing activity
Which of the following is most likely a lessee’s disclosure about operating leases?A . Lease liabilities.B . Future obligations by maturity.C . Net carrying amounts of leased assets.
Which of the following are normal characteristics of a financial lease? I. Maintenance of the leased asset is the responsibility of the lessee. II. The lease is generally cancellable by the lessee prior to the expiration date. III. Financial leases are generally fully amortized. IV. The lessee usually has the right to renew the lease at the end of the initial lease period. Select one: O a. I, II, III, and IV O b. I, II, and IV only O c. II, II, and IV only O d. I and Il only Oe. I and II only
Which 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.
If the lease in a sale-leaseback transaction meets one of the five lease tests and is therefore accounted for as a finance lease, who records the asset on its books and which party records interest expense during the lease period? Party recording theasset on its books Party recordinginterest expense Seller-lessee Purchaser-lessor Purchaser-lessor Purchaser-lessor Seller-lessee Seller-lessee Purchaser-lessor Seller-lessee
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 lease
Generally accepted accounting principles require that certain leaseagreements be accounted for as purchases. The theoretical basis for thistreatment is that a lease of this type A. Effectively conveys all of the benefits and risks incident to the ownership of property B. Is an example of form over substance C. Provides the use of the leased asset to the lessee for a limited period of time D. Must be recorded in accordance with the concept of cause and effect
Part 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.…
Which of the following is a criterion for classifying a lease for a lessee as a finance lease? The lease term is for a major part of the asset’s economic life. The lease transfers ownership of the asset to the lessee at the end of the lease term. The present value of the lease payments equals or exceeds substantially the asset’s fair value. All of the above.
The lessee normally measures the lease liability to be recorded as the: Select one: a. Present value of the minimum lease payments. b. The future value of the minimum lease payments c. The fair market value of the leased asset. d. The sum of the cash payments over the term of the lease.