lease

Question 1

are lease improvements capitalized and depreciated over the term of it s useful life or the lease term?

Answer 1

either, whichever one is shorter.

Question 2

a capital lease contains a bargain purchase option, over what period of time should the lessee amortized the lease property?

The economic life of the asset or the lease term?

Answer 2

the economic life of the asset, in addition, the lessee records the asset at the lower of the present value of the minimum lease payments or fair value of the asset.

Question 3

how to recognize rent expense for an operating lease

Answer 3

on a straight line basis, regardless of the actual payment structure

Question 4

how to record lease receivables

Answer 4

lower of fair value or the present value of the minimum lease payment

Question 5

how are leasehold improvements calculated

Answer 5

Remember: Leasehold improvements are capitalized and amortized (as any fixed asset) over the lesser of the useful life of the improvement or the remaining lease term.

Question 6

Ownership of asset is transferred at end of lease.
Lease contains bargain purchase option.
Lease term is 75% or more of economic life of asset.
Present value of lease payments is 90% or more of fair value of leased assets.
If one or more of these conditions are present, the lease is a capital lease.

Answer 6

capital lease

Question 7

Ownership transfers at the end of the lease
Written option for bargain purchase
Ninety percent rule: the pv of lease payments is 90% of the Fv of the leased property
Seventy five: the lease value is > 75% of the asset’s economic life

Answer 7

capital lease: owns

Question 8

gross lease receivables of a capital lease is

Answer 8

payments x period.

Question 9

FASB ASC 840-40-15-6 requires that “if a change in the provisions of a capital lease gives rise to a new agreement classified as an operating lease,

Answer 9

the transaction shall be accounted for under the sale-leaseback requirements.”

Question 10

The value of the machine from the capital lease

Answer 10

is the present value of the minimum lease payments and the present value of the guaranteed residual value,

Question 11

sales back lease, a gain should be deferred and amortized when

Answer 11

the seller-lessee retains the right to all the remaining use of the property

Question 12

guaranteed residual value

Answer 12

should be included as part of the minimum lease payments at present value.

Question 13

amount to disclose and aggregate

Answer 13

5 years + 3 years

Question 14

components of lease receivable for a lessor involved in a direct financing lease

Answer 14

minimum lease payments plus residual value.

Question 15

lease receivable is recorded at the lower of the present value of the minimum lease payments or

Answer 15

the fair value of the assets

Question 16

What is the major difference between an exchange transaction and a nonexchange transaction for governmental units?

Answer 16

The relationship between the amount of value given and received

Question 17

What is the purpose of SFAC 4 as stated in that concepts statement?

Answer 17

To provide a basis for establishing detailed accounting and reporting standards for nonbusiness entities

Question 18

A lease is classified as a capital lease because it contains a bargain purchase option. Over what period of time should the lessee amortize the leased property?

Answer 18

The economic life of the asset.

Question 19

direct financing lease, always use implicit rate

Answer 19

true