Prior to 2019, lessees did not include the right-of-use asset and the lease liability for operating leases on their balance sheets. Both FASB and IASB wrote new standards to require that lessees nearly always report an asset and liability on their balance sheets when they engage in a lease transaction. This accounting results in which of the following? Group of answer choices a more reliable estimation of the lease's value a better determination on whether the lessor held the risks and rewards of the leased asset's ownership a more faithful representation of the rights and obligations arising from leases All of the above

Prior to 2019, lessees did not include the right-of-use asset and the lease liability for operating leases on their balance sheets. Both FASB and IASB wrote new standards to require that lessees nearly always report an asset and liability on their balance sheets when they engage in a lease transaction. This accounting results in which of the following? Group of answer choices a more reliable estimation of the lease's value a better determination on whether the lessor held the risks and rewards of the leased asset's ownership a more faithful representation of the rights and obligations arising from leases All of the above

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 9E: Lessor Accounting with Guaranteed Residual Value Use the information for Edom Company in E20-8,...

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When preparing the journal entries for an operating lewhich of the following is NOT TRUE? If all of these answers are rue, select "All of the answers above are true". The lessee will reduce the Lease Liability account as lease payments are made. The lessor will recognize depreciation on equipment leased to others. The lessor will reclassify equipment leased to the lessee in an Equipment Leased to others account. The lessee will debit the Right-to-Use Asset account for the present value of the future lease payments. All of the answers above are true.
Which of the following is false with respect to lease accounting under IFRS? IFRS require lessees to recognize a right-of-use asset and related lease liability for leases with terms longer than one year. IFRS does not include any explicit guidance on collectibility of the lease payments by lessors and amounts necessary to satisfy a residual value guarantee. IFRS does not permit recognition of selling profit on direct financing leases at lease commencement. IFRS uses essentially the same lessor accounting model as GAAP for leases classified as sales-type or operating.
Which of the following is incorrect regarding the accounting for leases by a lessee? A. A lessee recognizes the same total amount of expense on a lease whether it uses the general recognition or the recognition exemption under PFRS 16. B. The interest expense on a lease liability decreases each period C. According to PFRS 16, executory costs, such as insurance and real property taxes, are always excluded from lease payments regardless of whether these costs transfer goods or services to the leasee. D. A lessee shall allocate the total consideration in a contract to the lease components and non-lease components of the contract
Which of the following is not correct statement for accounting by the lessee? The lessee records depreciation expense on the right-of-use asset. O b. The lessee recognizes interest expense on the lease liability over the lease term O c. The lease liability is computed as the present value of the lease payments. O d. The operating lease method is used to account for the lease.
1. GASB 87 provides a new framework for accounting for leases under the principle that leases are financings. No longer will leases be classified between capital and operating. Lessees will recognize an intangible asset and a corresponding liability. The liability will be based on the payments expected to be paid over the lease term, which includes an evaluation of the likelihood of exercising renewal or termination options in the lease. The city of El Paso decided to implement early adoption in 2019. It just signs 3 years lease for an office building with a remaining Economic life of 20 years. The building has a fair market value of $555,018 million. Based on an interest rate of 4 percent, annual lease payments are set at $200,000, the amount required to liquidate a $555,018 million, 3 year, 4 percent loan in equal annual installments. Total Liability reported in Government-Wide and Governmental Fund statement respectively for City of El Paso at the end of Year 1 will be:…
Which of the following statements regarding the new accounting rules, which take effect in 2019, for leases is false? If the lease term is one year or longer, a liability must be recognized. If the lease term is less than one year, an asset must be recognized. The new lease accounting rules will result in more assets and liabilities being recognized on the balance sheet. Leasing will likely remain popular under the new lease accounting rules because leases do not require a large initial outlay of cash.
Lessor Accounting with Guaranteed Residual Value Use the information for Edom Company in E20-8, except that the residual value was guaranteed by Davis Company (the lessee). Required: 1. Assuming that the lease is a sales-type lease, calculate the selling price. 2. Prepare a table summarizing the lease receipts and interest income earned by Edom. 3. Prepare journal entries for Edom tor the years 2019 and 2020.
Under IFRS: lessees may use alternative measurement bases (e.g., revaluation accounting) for the right-of-use asset. different measurement bases may be used for the right-of-use asset but only for leases with terms less than one year. the same guidance on collectibility of the lease payments is used by lessors as in GAAP. lessors are required to defer gross profit on direct financing leases
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…
Which of the following is not one of the procedures for accounting by the lessee for a decrease in lease scope? Decrease in the right of use asset equal to that of the peso decrease in finance lease liability to reflect decrease in scope both are required accounting procedures Adjustment of the decreased finance lease liability to the present value of future lease payments both are not required accounting procedures
Which of the following items would not be included in the calculation of the lease liability for a finance lease? A. guaranteed residual value B. executory costs paid by the lessee to a third party C. any payments required for failure to renew or extend the lease D. bargain purchase option
Which of the following statements is/are not true? Interest expense on the lease liability will increase the carrying amount of the liability. A lessee shall measure the lease liability at the present value of the lease payments that are not paid at that date, using the lessee's incremental borrowing rate. Right-of-use asset cost will include an estimates cost to be incurred by the lessee in dismantling and removing the underlying asset, restoring the site on which it is located or restoring the underlying asset to the condition required by the terms and conditions of the lease. Group of answer choices Only statement 2. All statements are true. Only statements 2 and 3. None of the statements are true.