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Course 171037- Accounting For Leases
  Final Exam
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171037v - Accounting For Leases

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Accounting
6 CPE Credit Hours

3/28/2024
Final Exam
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Read 'Chapter 0: Course Material' & answer the following question(s):
1. Which of the following is an advantage of leasing?
2. The present value of minimum lease payments should be used by the lessee in determining the amount of a lease liability under a lease classified by the lessee as
3. The methods of accounting for a lease by the lessee are
4. Drawbacks to leasing include:
5. Which of the following statements is correct?
6. Which of the following is a correct statement of one of the capitalization criteria?
7. One of the possible criteria for a capital lease is that the lease term be _________ equal to the estimated useful life of the property.
8. For a capital lease, the amount recorded initially by the lessee as a liability should normally
9. Executory costs include
10. To avoid leased asset capitalization, companies can devise lease agreements that fail to satisfy any of the four leasing criteria. Which of the following is not one of the ways to accomplish this goal?
11. The amount to be recorded as the cost of an asset under capital lease is equal to the
12. Minimum lease payments may include a
13. On January 1, 2X10, JCK Co. signed a contract for an 8-year lease of its equipment with a 10-year life. The present value of the 16 equal semiannual payments in advance equaled 85% of the equipment's fair value. The contract had no provision for JCK, the lessor, to give up legal ownership of the equipment. Should JCK recognize rent or interest revenue in 2X12, and should the revenue recognized in 2X12 be the same or smaller than the revenue recognized in 2X11?
14. A 6-year capital lease entered into on December 31, Year 4, specified equal minimum annual lease payments due on December 31 of each year. The first minimum annual lease payment, paid on December 31, Year 4, consists of which of the following?
15. In computing the present value of the minimum lease payments, the lessee should
16. The rate that, at the inception of the lease, the lessee would have incurred to borrow the funds necessary to buy the leased asset on a secured loan with repayment terms similar to the payment schedule called for in the lease is called.
17. Moody, Inc. leased equipment from Walker Company under a four-year lease requiring equal annual payments of $20,000, with the first payment due at the end of the year. The lease does not transfer ownership, nor is there a bargain purchase option. The equipment has a 4-year useful life and no salvage value. If Moody, Inc.’s incremental borrowing rate is 10% and the rate implicit in the lease (which is known by Moody, Inc.) is 8%, what is the amount recorded for the leased asset at the lease inception? (Note the following present values: At 8% for 4 periods, the PV Annuity Due = 3.5771 and the PV Ordinary Annuity = 3.31213. At 10% for 4 periods, the PV Annuity Due = 3.48685 and the PV Ordinary Annuity = 3.16986.)
18. Pisa, Inc. leased equipment from Tower Company under a four-year lease requiring equal annual payments of $86,038, with the first payment due at lease inception. The lease does not transfer ownership, nor is there a bargain purchase option. The equipment has a 4-year useful life and no salvage value. If Pisa, Inc.’s incremental borrowing rate is 10% and the rate implicit in the lease (which is known by Pisa, Inc.) is 8%, what is the amount recorded for the leased asset at the lease inception? (Note the following present values: At 8% for 4 periods, the PV Annuity Due = 3.5771 and the PV Ordinary Annuity = 3.31213. At 10% for 4 periods, the PV Annuity Due = 3.48685 and the PV Ordinary Annuity = 3.16986.)
19. The Lease Liability account should be disclosed as
20. In computing depreciation of a leased asset, the lessee should subtract
21. Andy, Inc. leased equipment from Tower Company under a four-year lease requiring equal annual payments of $86,038, with the first payment due at lease inception. The lease does not transfer ownership, nor is there a bargain purchase option. The equipment has a 4-year useful life and no salvage value. Andy, Inc.’s incremental borrowing rate is 10% and the rate implicit in the lease (which is known by Andy, Inc.) is 8%. Andy, Inc. uses the straight-line method to depreciate similar assets. What is the amount of depreciation expense recorded by Andy, Inc. in the first year of the asset’s life? (Note the following present values: At 8% for 4 periods, the PV Annuity Due = 3.5771 and the PV Ordinary Annuity = 3.31213. At 10% for 4 periods, the PV Annuity Due = 3.48685 and the PV Ordinary Annuity = 3.16986.)
22. If the residual value of a leased asset is guaranteed by a third party
23. Based solely upon the following sets of circumstances indicated below, which set gives rise to a sales-type or direct-financing lease of a lessor?
24. The initial direct costs of leasing
25. The primary difference between a direct-financing lease and a sales-type lease is the
26. In a sale-leaseback transaction, the seller-lessee has retained the property. The gain on the sale should be recognized at the time of the sale-leaseback when the lease is classified as a (n)
27. When a company sells property and then leases it back, any gain on the sale should usually be
28. For a sales-type lease,
29. Which one of the following statements is true?
30. Which of the following statements is true when comparing the accounting for leasing transactions under U.S. GAAP with IFRS?
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