Day 3 - Leases

Question 1

How are LHI amortized?

Answer 1

The lesser of:

1. The remaining life of the lease

OR

2. The life of the improvement

MCQ-00413

Question 2

What is the implicit rate of the lease used for if known?

Answer 2

Financing leases

MCQ-00407

Question 3

What is the initial amount capitalized in an operating lease?

Answer 3

The PV of the lease using the lessors rate if known

MCQ-00407

Question 4

If the Lesse OWNES what type of lease is it?

Answer 4

Finance Lease

Ownership
Written option
Net Present Value (90%)
Economic Life (75%)
Specialized

MCQ-01851

Question 5

A six year finance Lease was entered into on Dec 31, year 1, specified equal minimum annual lease payments due on Dec 31 each year. The first payment paid on Dec 31 year 1 consists of:

Answer 5

Lease liability

Note: Interest expense has not been incurred yet since the lease started on Dec 31 year 1

MCQ-00399

Question 6

A lessee had a 10 year finance Lease requiring equal annual payments. The reduction of the lease liability in year 2 should equal:

Answer 6

The current liability shown for the lease at the end of year 1

Rule: Finance leases are recorded as both an asset and liability at the PV of the minimum lease payments.

The asset depreciates and the liability is amortized using the interest method

The lease liability should be broken out into two parts, CL and LT Liability

MCQ-00565

Question 7

The lease is classified as a finance Lease with a written purchase option. Over what period of time should the Lessee amortize the leased property?

Answer 7

Over the economic Life of the asset

MCQ-08513

Question 8

When a lease is depreciated bc of a transfer of title or written purchase option, what period of time is the asset depreciated over?

Answer 8

The life of the asset

MCQ-00411