Financial Accounting (12th Edition) (What's New in Accounting)
12th Edition
ISBN: 9780134725987
Author: C. William Thomas, Wendy M. Tietz, Walter T. Harrison Jr.
Publisher: PEARSON
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Textbook Question
Chapter 9, Problem 13QC
Which type of lease will not increase a company’s assets or long-term liabilities?
- a. A one-year operating lease
- b. A finance lease
- c. A lease for an asset of a specialized nature with no alternative use at the end of the lease term
- d. A lease that transfers ownership of the asset to the lessee by the end of the lease term
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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.
Which 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.
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
Chapter 9 Solutions
Financial Accounting (12th Edition) (What's New in Accounting)
Ch. 9 - Brownlee Company issued 525,000, 8%, six-year...Ch. 9 - A bond with a face value of 250,000 and a quoted...Ch. 9 - Mission Furniture issued 500,000 in bonds payable...Ch. 9 - Bonds with an 8% stated interest rate were issued...Ch. 9 - Brimfest Corporation issued 2,400,000, 10-year, 6%...Ch. 9 - The Discount on Bonds Payable account a.is an...Ch. 9 - The discount on a bond payable becomes...Ch. 9 - The carrying value of Bonds Payable equals a.Bonds...Ch. 9 - Prob. 9QCCh. 9 - Prob. 10QC
Ch. 9 - Prob. 11QCCh. 9 - When a company retires bonds early, the gain or...Ch. 9 - Which type of lease will not increase a companys...Ch. 9 - Prob. 14QCCh. 9 - The debt ratio is calculated by dividing: a. total...Ch. 9 - Prob. 16QCCh. 9 - Prob. 17QCCh. 9 - Prob. 9.1ECCh. 9 - Prob. 9.1SCh. 9 - (Learning Objective 1: Determine bond prices at...Ch. 9 - (Learning Objective 1: Journalize basic bond...Ch. 9 - Prob. 9.4SCh. 9 - Prob. 9.5SCh. 9 - Prob. 9.6SCh. 9 - Prob. 9.7SCh. 9 - Prob. 9.8SCh. 9 - (Learning Objective 2: Account for bonds payable...Ch. 9 - Prob. 9.10SCh. 9 - LO 4,5 (Learning Objectives 4, 5: Deferred income...Ch. 9 - LO 5 (Learning Objective 5: Compute and evaluate...Ch. 9 - LO 5 (Learning Objective 5: Calculate the leverage...Ch. 9 - LO 6 (Learning Objective 6: Report liabilities)...Ch. 9 - (Learning Objective 1: Issue bonds payable...Ch. 9 - Prob. 9.16AECh. 9 - Prob. 9.17AECh. 9 - LO 2 (Learning Objective 2: Issue bonds payable...Ch. 9 - Prob. 9.19AECh. 9 - LO 4 (Learning Objective 4: Account for deferred...Ch. 9 - (Learning Objective 5: Evaluate debt-paying...Ch. 9 - LO 4, 5 (Learning Objectives 4, 5: Analyze current...Ch. 9 - Prob. 9.23AECh. 9 - (Learning Objective 1: Issue bonds payable...Ch. 9 - Prob. 9.25BECh. 9 - Prob. 9.26BECh. 9 - Prob. 9.27BECh. 9 - Prob. 9.28BECh. 9 - LO 4 (Learning Objective 4: Account for deferred...Ch. 9 - Prob. 9.30BECh. 9 - Prob. 9.31BECh. 9 - Prob. 9.32BECh. 9 - A bond with a face amount of 12,000 has a current...Ch. 9 - The carrying value on bonds equals Bends Payable...Ch. 9 - Prob. 9.35QCh. 9 - Prob. 9.36QCh. 9 - Prob. 9.37QCh. 9 - Prob. 9.38QCh. 9 - Prob. 9.39QCh. 9 - Prob. 9.40QCh. 9 - Prob. 9.41QCh. 9 - Prob. 9.42QCh. 9 - Prob. 9.43QCh. 9 - Prob. 9.44QCh. 9 - Prob. 9.45QCh. 9 - Prob. 9.46QCh. 9 - Prob. 9.47QCh. 9 - Prob. 9.48QCh. 9 - Prob. 9.49QCh. 9 - Prob. 9.50APCh. 9 - (Learning Objectives 1, 6: Issue bonds at a...Ch. 9 - Prob. 9.52APCh. 9 - Prob. 9.53APCh. 9 - (Learning Objectives 2, 3, 6: Issue convertible...Ch. 9 - Prob. 9.55APCh. 9 - Prob. 9.56BPCh. 9 - Prob. 9.57BPCh. 9 - Prob. 9.58BPCh. 9 - Prob. 9.59BPCh. 9 - (Learning Objectives 2, 3, 6: Issue convertible...Ch. 9 - (Learning Objectives 4, 5, 6: Report liabilities...Ch. 9 - Prob. 9.62CEPCh. 9 - Prob. 9.63CEPCh. 9 - Prob. 9.64SCCh. 9 - (Learning Objective 5: Explore an actual...Ch. 9 - Prob. 1FF
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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
- Which 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_forwardWhich type of lease will not increase a company’s assets or long-term liabilities?a. A one-year operating leaseb. A finance leasec. A lease for an asset of a specialized nature with no alternative use at the end of the lease termd. A lease that transfers ownership of the asset to the lessee by the end of the lease termarrow_forwardWhen should a lessor recognize as income a nonrefundable lease bonus paid by a lessee on signing an operating lease? at the inception of the lease over the lease term at the lease expiration when receivedarrow_forward
- 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 propertyarrow_forwardIn relation to a short-term operating lease, which of the following statements is NOT correct? a. The lessee will be responsible for repairs and maintenance of the leased asset b. The lease period will not cover the leased asset’s useful economic life c. The asset and lease obligation will not be recorded in the statement of financial position d. An operating lease is a rental agreement Clear my choicearrow_forwardWhen a lease agreement does not include a guarantee by the lessee that the lessor will recover a specified residual value at the end of the lease term, the lessor still includes an estimate of that residual value in its lease receivable. True or False True Falsearrow_forward
- Answer True or False Initial direct costs are immediately recognized as an expense by the lessor when the cost incurred in conjunction with an operating lease. Both finance and operating leases are subject to capitalization. Under an operating lease, the lease bonus paid by the lessee to the lessor and amortized over the lease term as a reduction to lease income. When rental payments vary over the term of the operating lease, the lessor should recognize lease income on a straight-line basis, unless there is another method that is more appropriate Initial direct costs are immediately recognized as an expense by the lessor when the cost incurred in conjunction with an operating lease. The lessor uses the implicit interest rate in determining the present value of the lease payments Termination penalties are included in the lease payments if the lease term reflects the lessee exercising an option to terminate the lease. In a sale and leaseback transaction that qualifies as a sale under…arrow_forwardFor which of the following conditions will the lessor classify a lease as a sales-type lease? A. The present value of the sum of the lease payments is equal to or more than the fair value of the underlying asset. B. The lease term is half of the underlying asset's economic life. C.The lease term is less than one year. D. The leased asset may be exchanged for a similar asset during the lease term.arrow_forwardUnder IFRS: lessees and lessors recognize right-of-use assets. lessees always use the operating method. lessees always recognize a right-of-use asset and lease liability for leases with terms less than one year. lessors do not distinguish between sales-type and direct financing leasearrow_forward
- 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.arrow_forwardWhich of the following items would not be included in the calculation of the lease liability for a finance lease? A. guaranteed residual value B. executory costs paid by the lessee to a third party C. any payments required for failure to renew or extend the lease D. bargain purchase optionarrow_forwardA lessor with a sales-type lease involving an unguaranteed residual value at the end of the lease term will report sales revenue in the period of inception of the lease at which of the following amounts? The sales price less the present value of the residual value. The lease payments plus the unguaranteed residual value. The cost of the asset to the lessor, less the present value of any unguaranteed residual value. The present value of the lease payments plus the present value of the unguaranteed residual value.arrow_forward
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Accounting for Finance and Operating Leases | U.S. GAAP CPA Exams; Author: Maxwell CPA Review;https://www.youtube.com/watch?v=iMSaxzIqH9s;License: Standard Youtube License