Question 1

Discuss the financial statement disclosure requirements for all leases entered into by the lessor.

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Question 2

Lotsa Bucks leased equipment to Shannon Company on January 1, 2018. The lease payments were calculated to provide the lessor a 10% return. Ten annual lease payments of $20,000 are due at the beginning of each year beginning January 1, 2018. The present value of an annuity due of $1 at 10% for ten periods is 6.75902.
Required:
1. Prepare the journal entries to record the lease by Shannon at January 1, 2018, and at December 31, 2018, the end of the reporting period. Consider this to be a finance lease. Round your answers to the nearest whole dollar amounts.
2. Prepare the journal entries to record the lease by Shannon at January 1, 2018, and at December 31, 2018, the end of the reporting period. Consider this to be an operating lease. Round your answers to the nearest whole dollar amounts.

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Question 3

What is selling profit in a sales-type lease? How does the lessor account for selling profit in a sales-type lease with a selling profit?

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Question 4

Discuss the three major types of leases that may apply to the lessor when there is no third party guarantee. How do they differ?

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Question 5

The discount rate influences virtually every amount reported in connection with a lease by both the lessor and the lessee. What is the lessor's discount rate when determining the present value of lease payments? What is the lessee's discount rate?

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Question 6

Compare and contrast the way leases are classified between operating leases and finance leases under U.S. GAAP and IFRS.

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Question 7

Discuss the economic advantages of leasing.

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Question 8

Discuss the financial statement disclosure requirements for all leases entered into by the lessee.

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Question 9

1) In a lease transaction, what are initial direct costs?
2) How does the lessor account for initial direct costs in an operating lease, a sales-type lease with selling profit, and a sales-type lease with no selling profit?

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Question 10

Describe the use of amortization for an asset leased under a finance lease. Include a discussion of the amortization period.

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Question 11

Deal Leasing leased equipment to Hand Company on January 1, 2018. The lease payments were calculated to provide the lessor a 10% return. Ten annual lease payments of $60,000 are due at the beginning of each year beginning January 1, 2018. The present value of an annuity due of $1 at 10% for ten periods is 6.75902.
-Required:
Consider this to be an operating lease. Round your answers to the nearest whole dollar amounts.
1. Prepare the journal entries to record the lease by Hand (lessee) at January 1, 2018.
2. Prepare the journal entries to record the lease by Hand (lessee) at December 31, 2018, the end of the first reporting period.

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Question 12

Briefly describe the conceptual basis for asset and liability recognition under the right-of-use approach used by the lessee in a lease transaction.

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Question 13

How do U.S. GAAP and International Financial Reporting Standards (IFRS) compare to classifying a lease as a finance lease?

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Question 14

In accounting for a finance lease/sales-type lease, explain how the lessee's and lessor's income statements are affected.

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Question 15

Sometimes a lease might specify that lease payments may be increased (or decreased) at some future time during the lease term depending on whether or not some specified event occurs such as revenues or profits exceeding some designated level. Under what circumstances are contingent rentals included or excluded from lease payments? If excluded, how are they recognized in income determination?

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Question 16

What amounts are considered to be lease payments when the lessee calculates the right-of-use asset and lease payable?

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Question 17

Differentiate between guaranteed and unguaranteed residual value of leased property. Does the difference affect the lessor's accounting for the lease?

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Question 18

In accounting for an operating lease, describe how the lessee's and lessor's income statements are affected.

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Question 19

A lessee should classify a lease transaction as a finance lease if it is noncancelable and one or more of five classification criteria are met. What are these criteria?

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Question 20

In a financing lease, "front loading" of lease expense and lease revenue occurs. What does this mean, and how is it avoided in an operating lease?

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Quiz 15: Leases