Chapter 8 - Operating Lease

Question 1

An agreement whereby the lessor conveys to the lessee in return for a payment or series of payments the right to use an asset for an agreed period of time.

Answer 1

Lease

Question 2

Kinds of lease

Answer 2

Operating lease and finance or capital lease

Question 3

The lease oayments shall be recognized as an expense on a straight line basis over the lease term unkess anither systematic basis is more representative of the time patteen of the user’s benefit.

Answer 3

Operating lease - lessee

Question 4

Lease bonus

Answer 4

Lessee - treated as prepaid rent expense to be amortized over the lease term.

Lessor - recognized as unearned rent incone to be amortized over the lease term.

Question 5

Leasehold improvement

Answer 5

Lessee - depreciated over the life of the improvement or lease term, whichever is shorter.

Question 6

Residual value

Answer 6

Lessee - ignored

Lessor - included in computing depreciation

Question 7

Security deposit

Answer 7

Lessee - asset

Lessor - liability

Question 8

The lease income shall be recognized on a straight line basis over the lease term, unless another systematic basis is more representative of the time pattern in which use benefit derived from the leased asset is diminished.

Answer 8

Operating lease - lessor

Question 9

What are executory coats?

Answer 9

Depreciation of leased property, real property taxes and maintenance

Question 10

Often icurred by the lessor and include amounts such as commissions, legal fees and internal costs that are incremental and directly attributable to negotiating and arranging a lease.

Answer 10

Initial direct costs

Question 11

Initial direct costs

Answer 11

Lessor - added to the carrying amount of the leased asset and recognized as an expense over the lease term on the same basis as the lease income