ACCT 305 ACCT305 Chapter 15 Quiz Answers

ACCT 305 ACCT305 Chapter 15 Quiz Answers

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DeVry ACCT 305 ACCT/305 ACCT305 Chapter 15 Quiz

  1. Which of the following leases would least likely be classified as an operating lease by the lessee?
  2. Which of the following is not a sufficient criterion for a lessee to classify a lease as a capital lease?
  3. For a lessor to consider a leasing arrangement to be a capital lease, collectibility of the lease payments must be reasonably assured and:
  4. In an operating lease in which the asset's economic life and lease term are different:
  5. If a capital lease contains a bargain purchase option, the lessee should depreciate the leased asset:
  6. A necessary condition for a sales-type lease is:
  7. The inception of a six-year capital lease is December 31, 2011. The agreement specifies equal annual lease payments on December 31 of each year. For the lessee, the first payment on December 31, 2011, includes:
  8. Universal Leasing Corp. leases farm equipment to its customers under direct-financing leases. Typically the equipment has no residual value at the end of leases and the contracts call for payments at the beginning of each year. Universal's target rate of return is 10%. On a five-year lease of equipment with a fair value of $485,100, Universal will earn interest revenue over the life of the lease of:
  9. In a ten-year capital lease, the portion of the annual lease payment in the lease's third year that represents interest is:
  10. On January 1, 2011, Walter Scott Co. leased machinery under a 6-year lease. The machinery has a 9-year economic life. The present value of the monthly lease payments is determined to be 85% of the machinery's fair value. The lease contract includes neither a transfer of title to Scott nor a bargain purchase option. What amount should Scott report in its 2011 income statement?
  11. Pyramid Properties entered a lease that contains a bargain purchase option. When calculating the amount to capitalize as a leased asset at the inception of the lease term, the payment called for by the bargain purchase option should be:
  12. Tucson Fruits leased farm equipment from Barr Machinery on July 1, 2011. The lease was recorded as a sales-type lease. The present value of the lease payments discounted at 10% was $40.5 million. Ten annual lease payments of $6 million are due at the beginning of each year beginning July 1, 2011. Barr had purchased the equipment for $33 million. What amount of interest revenue from the lease should Barr report in its 2011 income statement?
  13. On January 1, 2011, Jackson Properties leased a warehouse to Jensen Distributors. The operating lease provided for a nonrefundable bonus paid by Jensen. Jackson should recognize the bonus in earnings:
  14. Grant Industries leased exercise equipment to Silver Gyms on July 1, 2011. Grant recorded the lease as a sales-type lease at $810,000, the present value of minimum lease payments discounted at 10%. The lease called for ten annual lease payments of $120,000 due at the beginning of each year. The first payment was received on July 1, 2011. Grant had manufactured the equipment at a cost of $750,000. The total increase in earnings (pretax) on Grant's 2011 income statement would be:
  15. Brown Properties entered into a sale-leaseback transaction. Brown retains the right to substantially all of the remaining use of the property. A gain resulting from the sale should be:
  16. A lease is a capital lease (called a finance lease under IFRS) if substantially all risks and rewards of ownership are transferred whether using US GAAP or IFRS. When making this determination, less judgment, more specificity is applied using
  17. When the leaseback in a sale-leaseback transaction is an operating lease, a company that prepares its financial statements using IFRS:
  18. When recording a capital lease (called a finance lease under IFRS) Blue Company is aware that the implicit interest rate used by the Gray Company, the lessor, to calculate lease payments is 7%. Blue's incremental borrowing rate is 6%. Blue should record the leased asset and lease liability at the present value of the lease payments discounted at:
  19. Which of the following would a lessee not record in connection with a lease?
  20. Which of the following would a lessor not record in connection with a lease?
  21. If a lease contains a purchase option, the exercise price is considered to be an additional cash payment if:
  22. The commencement of a five-year lease is December 31, 2013. The agreement specifies equal annual lease payments on December 31 of each year. In its 2014 income statement:
  23. Adonis Co. recorded a right-of-use asset of $400,000 in a ten-year lease under which no profit was recorded at commencement by the lessor. The interest rate charged the lessee was 10%. The balance in the right-of-use asset after two years will be:
  24. Simpson Co. recorded a residual asset of $400,000 in a ten-year lease under which no profit was recorded at commencement by the lessor. The interest rate charged the lessee was 10%. The balance in the residual asset after two years will be:
  25. Farrakhan Fruits leased farm equipment from Hall Machinery on January 1, 2013. The present value of the lease payments discounted at 10% was $40 million. Ten annual lease payments of $6 million are due at the beginning of each year beginning January 1, 2013. Hall had constructed the equipment recently for $33 million and its retail fair value was $50 million. What amount of interest revenue from the lease should Hall report in its 2013 income statement?
  26. Farrakhan Fruits leased farm equipment from Hall Machinery on January 1, 2013. The present value of the lease payments discounted at 10% was $40 million. Ten annual lease payments of $6 million are due at the beginning of each year beginning January 1, 2013. Hall had constructed the equipment recently for $33 million and its retail fair value was $50 million. What amount did Hall record as a residual asset?
  27. Farrakhan Fruits leased farm equipment from Hall Machinery on January 1, 2013. The present value of the lease payments discounted at 10% was $40 million. Ten annual lease payments of $6 million are due at the beginning of each year beginning January 1, 2013. Hall had constructed the equipment recently for $33 million and its retail fair value was $50 million. Its estimated useful life was 15 years. What amount of profit did Hall record at the commencement of the lease?
  28. Farrakhan Fruits leased farm equipment from Hall Machinery on January 1, 2013. The present value of the lease payments discounted at 10% was $40 million. Ten annual lease payments of $6 million are due at the beginning of each year beginning January 1, 2013. Hall had constructed the equipment recently for $33 million and its retail fair value was $50 million. Its estimated useful life was 15 years. The total increase in earnings (pretax) in Hall's 2013 income statement would be:
  29. Farrakhan Fruits leased farm equipment from Hall Machinery on January 1, 2013. The present value of the lease payments discounted at 10% was $40 million. Ten annual lease payments of $6 million are due at the beginning of each year beginning January 1, 2013. Hall had constructed the equipment recently for $33 million and its retail fair value was $50 million. Its estimated useful life was 15 years. The total decrease in earnings (pretax) in Farrakhan's 2013 income statement would be:
  30. Barton Industries leased exercise equipment to Witherspoon Gyms on July 1, 2013. Grant recorded the lease receivable at $810,000, the present value of lease payments discounted at 10% and fair value of the equipment. The lease called for ten annual lease payments of $120,000 due at the beginning of each year. The first payment was received on July 1, 2013. Barton had manufactured the equipment at a cost of $750,000. The total increase in earnings (pretax) on Barton's December 31, 2013, income statement would be:

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