sssssssssssssssssss Question 6 In an operating lease the agreement would results in purchasing the asset by the lessee. Theanswer is True or False Question 7 A lessor's gross income in finance lease is calculated as the sum of theminimum lease payments plus any residual value payable on the lease. The answer is True or false Question8 An underlying asset not considered an identified asset if the suppliers substitution right not substantive.The answer is True or False Question 9 Lease equipment reduces the risk of obsolescence to the lessee andpasses the risk to the lessor. The answer is True or False Question 10 If the lessor is not a manufacturer ordealer, the asset sold under a finance lease will not be included in Inventory. The answer is True or False

“Since you have posted multiple questions, we will provide the solution only to the first question…

Question 6 In an operating lease the agreement would results in purchasing the asset by the lessee. The answer is True or False Question 7 A lessor's gross income in finance lease is calculated as the sum of the

Question 6 In an operating lease the agreement would results in purchasing the asset by the lessee. The answer is True or False Question 7 A lessor's gross income in finance lease is calculated as the sum of the

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Concept explainers

Leasing

Leasing is a contractual arrangement in which someone (a lessee) pays the owner (or lessor) of a building, land, vehicle, or other asset for the use of that asset. The lease is the agreement between lessee and lessor.

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Question 6 In an operating lease the agreement would results in purchasing the asset by the lessee. The answer is True or False Question 7 A lessor's gross income in finance lease is calculated as the sum of the minimum lease payments plus any residual value payable on the lease. The answer is True or false Question 8 An underlying asset not considered an identified asset if the suppliers substitution right not substantive. The answer is True or False Question 9 Lease equipment reduces the risk of obsolescence to the lessee and passes the risk to the lessor. The answer is True or False Question 10 If the lessor is not a manufacturer or dealer, the asset sold under a finance lease will not be included in Inventory. The answer is True or False
PROBLEM 1: TRUE OR FALSE 1. According to PFRS 16 Leases, a lessee shall classify each of its leases into a finance lease or an operating lease. 2. A contract is (or contains) a lease if it conveys the right to control the use an identified asset for a period of time in exchange for consideration. 3. An underlying asset is not considered an identified asset for the purpose of applying the accounting requirements of PFRS 16 if the supplier's substitution right is not substantive. 4. The current view on accounting for leases by lessees is that all leases are 'on-balance sheet' items, with very minimal exceptions. 5. In most leases, a lessee recognizes an asset and a liability at the commencement date. 6. According to PFRS 16, lease payments include any amount to be paid for purchase options that are reasonably certain to be exercised and amounts that are expected to be paid under residual value guarantees. 7. The lessee always uses its incremental borrowing rate in determining the present…
Question 3 A lease record interest expenses in both finance and operating lease. The answer is True or False Question 4 A capitalised lease asset is depreciated over the term of then lease by the lessee. The answer is True or False Question 5 If a portion of the asset is not physically distinct and the lessee does not obtain all the economic benefits from the use of the asset, it is not an identified asset. The answer is True or False
Answer True or False Both finance and operating leases are subject to capitalization. Under an operating lease, the lease bonus paid by the lessee to the lessor and amortized over the lease term as a reduction to lease income. When rental payments vary over the term of the operating lease, the lessor should recognize lease income on a straight-line basis, unless there is another method that is more appropriate The lessor uses the implicit interest rate in determining the present value of the lease payments Termination penalties are included in the lease payments if the lease term reflects the lessee exercising an option to terminate the lease. In a sale and leaseback transaction that qualifies as a sale under PFRS 16, the seller-lessee recognized only the amount of any gain or loss that relates to the rights transferred to the buyer-lessor
Guaranteed residual value is a fixed amount required by the lessor at the termination of the lease only in the absence of a purchase option. a. TRUE b. FALSE
D2. If a lease does not transfer control of the asset over the lease term, the lessor will generally account for the lease as a sales-type lease. true false
t34 Initial direct costs incurred by the lessor in an operating lease should beA. expensed in the year of incurrence by including them in the cost of goods sold or by treating them as a sellingexpense.B. deferred and recognized as reduction in the interest rate implicit in the lease.C. capitalized as part of asset cost and depreciated over the lease term.D. deferred and carried on the statement of financial position until the end of the lease term.
Statement 1: When the residual value guaranteed by the lessee at the end of lease term is higher than the fair value of the underlying asset, settlement shall be made by the lessee and recognized as a loss.Statement 2: When the residual value guaranteed by the lessee at the end of lease term is higher than the fair value of the underlying asset, no settlement shall be made by the lessee and no recognition of any gain or loss. Group of answer choices Only statement 2 is correct Only statement 1 is correct Both statements are correct Both statements are incorrect.
12 QUESTION 8 A capital lease is considered a ____ agreement. a. negotiable b. noncancelable c. maintenance d. short-term. QUESTION 9 The sale and leaseback is advantageous to the lessee because the lessee _____. a. is never required to pay taxes and insurance b. receives cash from the sale of the asset c. cannot continue using the asset d. receives title to property at the termination of the lease. QUESTION 10 A primary difference between leveraged leases and other financial leases is that ____. a. unleveraged leases are usually tax-motivated b. the lessor in a leveraged lease is invariably the manufacturer of the leased asset c. leveraged leases involve the use of nonrecourse debt d. leveraged leases must be capitalized and shown on the lessee's balance sheet
24. One of the following statements is false: * a. If the underlying asset will not revert to the lessor, the residual value is simply ignored by the lessor in the computation of unearned interest income and gross profit on the sale. b. The underlying asset will remain with the lessee if the lease provides for either a purchase option that is reasonably to be exercised or transfer of title to the lessee upon the lease expiration. c. When a lessor actually sells an asset that it has been leasing, the difference between the sales price and the carrying amount of the lease receivable is recognized in profit or loss. d. The gain or loss that pertains to the right retained by the seller- lessee in a sales and leaseback transaction is not recognized.
4. Initial direct costs incurred by the lessor in connection with specific leasing activities as in negotiating and securing leasing arrangements in a direct finance lease would a. result to an increase of the implicit interest rate. b. result to a decrease of the implicit interest rate. c. result to either an increase or a decrease of the implicit interest rate depending on the given facts. d. be ignored if the lease qualifies as a dealer's lease.
Answer True or False Initial direct costs are immediately recognized as an expense by the lessor when the cost incurred in conjunction with an operating lease. Both finance and operating leases are subject to capitalization. Under an operating lease, the lease bonus paid by the lessee to the lessor and amortized over the lease term as a reduction to lease income. When rental payments vary over the term of the operating lease, the lessor should recognize lease income on a straight-line basis, unless there is another method that is more appropriate Initial direct costs are immediately recognized as an expense by the lessor when the cost incurred in conjunction with an operating lease. The lessor uses the implicit interest rate in determining the present value of the lease payments Termination penalties are included in the lease payments if the lease term reflects the lessee exercising an option to terminate the lease. In a sale and leaseback transaction that qualifies as a sale under…