Chapter 10 - Direct Financing Lease - Lessor

Question 1

An arrangement between a financing entitty and a lesse.

Answer 1

Direct financing lease

Question 2

This is equal to the cost of the net asset plus any initial direct cost paid by the lessor in direct financing lease.

Answer 2

Net investment in the lease

Question 3

In a direct financing lease-lessor, cost is added to the cost of the asset to get the net investment in the lease.

Answer 3

Initial direct cost

Question 4

How to compute annual rental?

Answer 4

Divide the net investment in the lease to be recovered from rental by present value factor of an annuity of 1 for a number of periods using a desired rate of return

Question 5

The recognition of finance incone shall be based on a pattern reflecting a constant periodic rate of return on the lessor’s net investment outstanding in respect of the finance lease.

Answer 5

Effective interest method

Question 6

Presentation for direct financing lease

Answer 6

The lessors shall recognize assets held under a finance lease in their statement of financial position and present them as a receivable at an amount equal to the net investment in the lease

Question 7

If the machinery will revert to the lessor at the end of the lease term, the present value of the residual value is?

Answer 7

Deducted from tge cost of the asset

Question 8

If the machinery will not revert to the lessor at the end of the lease term, the residual value is?

Answer 8

Completely ignored

Question 9

This is equal to the gross rentals for the entire lease term plus the absolute amount of the residual alue, whether guatanteed or unguaranteed.

Answer 9

Gross investment

Question 10

This is the amount debited to lease receivable

Answer 10

Gross investment

Question 11

This is the total financial revenue of the lessor which is the difference between the gross investment and net investment in the lease.

Answer 11

Unearned interest income