Chapter 11 - Sales Type Lease - Lessor

Question 1

It is actually a manufacturer or dealer that uses the lease as a means of facilitating the sale of its product.

Answer 1

Lessor in sale type lease

Question 2

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 2

Gross investment

Question 3

This is equal to the present value of the gross rentals plus the present value of the residual value, whether guaranteed or unguaranteed in sales type lease.

Answer 3

Net investment in the lease

Question 4

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

Answer 4

Unearned interest income

Question 5

The amount is equal to the net investment in the lease or fair vale of the asset, whichever is lower.

Answer 5

Sales

Question 6

This is equal to the cost of the asset sold plus the initial direct cost paid by the lessor.

Answer 6

Cost of sales

Question 7

Sales minus cost of salea

Answer 7

Gross profit

Question 8

This amount is expensed immediately in a sales type lease as component of cost of sales.

Answer 8

Initial direct cost

Question 9

The residual value is completely ignored by the lessor in the computation of unearned interest income and gross profit on the sale if:

Answer 9

The leased asset will not revert to the lessor

Question 10

The difference between the sale price and the carrying amount of the lease receivable under a finance lease is recognized through?

Answer 10

Profit and loss

Question 11

Balance of the lease receivable minus the unearned interest income is equal to?

Answer 11

Carrying amount of the lease receivable