Question 1

On December 1, 2011, Goetz Corporation leased office space for 10 years at a monthly rental of $90,000.On that date Perez paid the landlord the following amounts:
The entire amount of $765,000 was charged to rent expense in 2011.What amount should Goetz have charged to expense for the year ended December 31, 2011?

Accepted Answer

The answer of On December 1, 2011, Goetz Corporation leased...

Question 2

All of the followings are ways in which companies avoid leased assets capitalization in devising lease agreements, except:

Accepted Answer

Arranging for the present value of the minimum lease payments to be sufficiently more than the fair value of the leased property would not help in avoiding capitalization; instead, it would likely lead to capitalization.

Question 3

Which of the following would not be included in the Lease Receivable account?

Accepted Answer

The answer of Which of the following would not be...

Question 4

Use the following information for questions.
Yueve's Company is negotiating three leases for store locations Yueve's incremental borrowing rate is 12 percent and the lessor's implicit rate is unkown (it is impracticable to determine)
Each store will have an economic useful life of 30 years.lease payments will be made at the end of each year.Based on the data below properly classify each of the leases as an operating lease or a finance lease.The purchase price for each property is listed as an alternative to leasing.
 
-Based on this information, which test(s) does Location B pass for classifying the lease as a finance lease.

Accepted Answer

The answer of Use the following information for questions.
Yueve's Company...

Question 5

All of the following statements are true regarding the circumvention of accounting rules for leases when determaining whether a lease qualifies as an operating or capital lease?

Accepted Answer

The answer of All of the following statements are true...

Question 6

Which of the following is true regarding the deferral of sale profits on a sale-leaseback using IFRS?

Accepted Answer

Under IFRS, if a sale-leaseback transaction results in an operating lease and the sale is at fair value, both profits and losses are recognized immediately.

Question 7

On January 1, 2011, Dean Corporation signed a ten-year noncancelable lease for certain machinery.The terms of the lease called for Dean to make annual payments of $100,000 at the end of each year for ten years with title to pass to Dean at the end of this period.The machinery has an estimated useful life of 15 years and no residual value.Dean uses the straight-line method of depreciation for all of its fixed assets.Dean accordingly accounted for this lease transaction as a finance lease.The lease payments were determined to have a present value of $671,008 at an effective interest rate of 8%.With respect to this capitalized lease, Dean should record for 2011

Accepted Answer

The answer of On January 1, 2011, Dean Corporation signed...

Question 8

All of the following statements are true with regard to how the statement of financial position will be similarly affected by leasing the assets as opposed to issuing bonds and purchasing the assets, except which statement?

Accepted Answer

The specific accounts affected by leasing versus purchasing with bonds would differ, as leasing involves recognizing a right-of-use asset and a lease liability, while purchasing involves recognizing the asset and a bond payable.

Question 9

For a sales-type lease,

Accepted Answer

In a sales-type lease, the gross profit is determined at the inception of the lease and is not affected by whether the residual value is guaranteed or unguaranteed.

Question 10

The Lease Liability account should be disclosed as

Accepted Answer

The lease liability should be classified as a current liability to the extent that payments are due within the next 12 months, and as a non-current liability for payments due after that. Therefore, the current portion should be disclosed in current liabilities and the remaining balance should be disclosed in non-current liabilities.

Question 11

If companies want to disqualify a lease as a finance lease to the lessee, while having the same lease qualify as a finance (sales or financing) lease to the lessor, which of the following are true?

Accepted Answer

Under IFRS guidelines, a lease can only be classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership to the lessee. If a company wants to disqualify a lease as a finance lease to the lessee, they must ensure that the lease does not meet these criteria. However, if the same lease qualifies as a finance (sales or financing) lease to the lessor, it must still meet the IFRS criteria for a finance lease. Therefore, the company must make information about the implicit rate (used by the lessor) unavailable to the lessee, and use the incremental borrowing rate by the lessee only when it is higher than the implicit interest rate of the lessor. This allows the company to disqualify the lease as a finance lease to the lessee while keeping it as a finance (sales or financing) lease to the lessor. The inclusion of a bargain purchase option or the specification of transfer of the property to the lessee are not necessarily required to disqualify a lease as a finance lease to the lessee while keeping it as a finance (sales or financing) lease to the lessor.

Question 12

If the lease in a sale-leaseback transaction meets one of the four leasing criteria 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?

Accepted Answer

The answer of If the lease in a sale-leaseback transaction...

Question 13

Use the following information for questions.
Yueve's Company is negotiating three leases for store locations Yueve's incremental borrowing rate is 12 percent and the lessor's implicit rate is unkown (it is impracticable to determine)
Each store will have an economic useful life of 30 years.lease payments will be made at the end of each year.Based on the data below properly classify each of the leases as an operating lease or a finance lease.The purchase price for each property is listed as an alternative to leasing.
 
-Based on this information, which test(s) does Location A pass for classifying the lease as a finance lease.

Accepted Answer

The answer of Use the following information for questions.
Yueve's Company...

Question 14

In a sale-leaseback transaction where none of the four leasing criteria are satisfied, which of the following is false?

Accepted Answer

In a sale-leaseback transaction where none of the four leasing criteria are satisfied, the purchaser-lessor does not record a gain. Instead, the transaction is treated as a financing arrangement.

Question 15

When a company sells property and then leases it back, any gain on the sale should usually be

Accepted Answer

When a company sells property and then leases it back, any gain on the sale should be deferred and recognized as income over the term of the lease. This is because the transaction is essentially a financing arrangement and not a true sale. The gain is recognized over the term of the lease because it represents the amount of financing provided by the lessor to the lessee.

Question 16

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?

Accepted Answer

A bargain purchase option is actually one of the criteria that would require capitalization of a lease, not avoid it.

Question 17

Which of the following statements is correct?

Accepted Answer

A) In a direct-financing lease, initial direct costs are added to the net investment in the lease.
B) In a sales-type lease, initial direct costs are expensed in the year of incurrence.
C) For operating leases, initial direct costs are deferred and allocated over the lease term.

All of these statements are correct. The treatment of initial direct costs varies depending on the type of lease. In a direct-financing lease, initial direct costs are added to the net investment in the lease. In a sales-type lease, initial direct costs are expensed in the year of incurrence. For operating leases, initial direct costs are deferred and allocated over the lease term.

Question 18

When lessors account for residual values related to leased assets, they

Accepted Answer

The answer of When lessors account for residual values related...

Question 19

Which of the following is true regarding footnote disclosure of operating lease payments under IFRS and U.S.GAAP?

Accepted Answer

The answer of Which of the following is true regarding...

Question 20

Use the following information for questions.
Yueve's Company is negotiating three leases for store locations Yueve's incremental borrowing rate is 12 percent and the lessor's implicit rate is unkown (it is impracticable to determine)
Each store will have an economic useful life of 30 years.lease payments will be made at the end of each year.Based on the data below properly classify each of the leases as an operating lease or a finance lease.The purchase price for each property is listed as an alternative to leasing.
 
-Based on this information, which test(s) does Location B pass for classifying the lease as a finance lease.

Accepted Answer

The answer of Use the following information for questions.
Yueve's Company...

Quiz 21: Accounting for Leases

All of the followings are ways in which companies avoid leased assets capitalization in devising lease agreements, except:

Which of the following would not be included in the Lease Receivable account?

All of the following statements are true regarding the circumvention of accounting rules for leases when determaining whether a lease qualifies as an operating or capital lease?

Which of the following is true regarding the deferral of sale profits on a sale-leaseback using IFRS?

All of the following statements are true with regard to how the statement of financial position will be similarly affected by leasing the assets as opposed to issuing bonds and purchasing the assets, except which statement?

For a sales-type lease,

The Lease Liability account should be disclosed as

If companies want to disqualify a lease as a finance lease to the lessee, while having the same lease qualify as a finance (sales or financing) lease to the lessor, which of the following are true?

If the lease in a sale-leaseback transaction meets one of the four leasing criteria 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?

In a sale-leaseback transaction where none of the four leasing criteria are satisfied, which of the following is false?

When a company sells property and then leases it back, any gain on the sale should usually be

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?

Which of the following statements is correct?

When lessors account for residual values related to leased assets, they

Which of the following is true regarding footnote disclosure of operating lease payments under IFRS and U.S.GAAP?