Lease 1 does not contain a bargain purchase option, but the lease term is equal to 90 percent of the estimated economic life of the leased property. Lease 2 does not transfer ownership of the property to the lessee by the end of the lease term, but the lease term is equal to 75 percent of the estimated economic life of the leased property. How should the lessee classify these leases? Lease 1 1. Operating lease 2. Operating lease 3. Finance lease 4. Finance lease. 03 02 01 4 Lease 2 Finance lease Operating lease Finance lease Operating lease

Lease 1 does not contain a bargain purchase option, but the lease term is equal to 90 percent of the estimated economic life of the leased property. Lease 2 does not transfer ownership of the property to the lessee by the end of the lease term, but the lease term is equal to 75 percent of the estimated economic life of the leased property. How should the lessee classify these leases? Lease 1 1. Operating lease 2. Operating lease 3. Finance lease 4. Finance lease. 03 02 01 4 Lease 2 Finance lease Operating lease Finance lease Operating lease

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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At its inception, the lease term of Lease G is 65% of the estimated remaining economic life of the leased property. This lease contains a purchase option that is reasonably expected to be exercised. The lessee should record Lease G as: a. neither an asset nor a liability b. an asset but not a liability c. an expense d. an asset and a liability
Lease A does not contain a bargain purchase option, but the lease term is equal to 90 percent of the estimated economic life of the leased property. Lease B does not transfer ownership of the property to the lessee by the end of the lease term, but the lease term is equal to 75 percent of the estimated economic life of the leased property. How should the lessee classify these leases under U.S. GAAP? Lease A Lease B A.) Operating lease Capital lease B.) Operating lease Operating lease C.) Capital lease Capital lease D.) Capital lease Operating lease
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 property
9. Baa Co. enters into a lease of commercial space. The contract specifies a non-cancellable term of five years and a two-year, market-priced commencement, Baa Co. makes significant leasehold improvements with a useful life of ten years. Baa Co. determines that the economic benefits of the leasehold renewal option. Before the lease improvements can only be realized through continued of the leased property. At lease commencement, Occupancy b. 5 years c. 7 years d. 10 years a. 2 years Which of the following statements is incorrect regarding the accounting for lease liabilities? Lease liabilities are subsequently measured at amortized cost, adjusted for lease modifications and reassessments. b. Subsequent lease payments are apportioned to both the interest and the principal balance of the lease liability. c Periodic interests reflect a varying rate of interest on the remaining balance of the lease liability. d. Periodic interests reflect a constant rate of interest on the remaining…
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 of the following is not one of the criteria for determining whether a lease is a finance lease? A. The asset cost is greater than $100,000B. The lease grants the lessee an option to purchase the asset that the lessee is reasonably certain to exerciseC. The lease term is for the major part of the remaining economic life of the assetD. Alease that transdies ownership of the asset to the lessee by the end of the lease term
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.
For accounting purposes, which one of the following conditions would automatically cause a lease to be classified as a capital lease? Multiple Choice O O O The lessee can purchase the asset at fair market value at the end of the lease. The lease transfers ownership of the asset to the lessee by the end of the lease term. The lease term equals 60 percent or more of the asset's estimated economic life. The present value of the lease payments equals 75 percent of the asset's fair market value at lease inception. The lessor can renew the lease at the end of the lease term.
Which of the following is NOT a correct statement of one of the lease classification test for the lessee? If the lease transfers ownership of the property to the lessee, it will be classified as a finance lease If the lease contains a bargain purchase option, it will be classified as a finance lease If the lease term is equal to or more than 75% of the estimated economic life of the leased property, it will be classified as a finance leas If at the end of the lease termthe leased property has an alternative use to the lessor, this lease is classified as a finance lease
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.
Lease 105 does not contain a purchase option but the present value of the lease payments equals the fair value of the underlying asset. Lease 210 does not transfer ownership to the lessee but the lease term is for the majority of the estimated economic life of the leased asset. How should the lessee classify these leases?
For 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.