[THEORY] Operating Lease - Lessor Flashcards
Rent received in advance by the lessor in an operating lease should be recognized as revenue:
a. When received
b. At the lease inception
c. At the lease expiration
d. In the period specified by the lease
d. In the period specified by the lease
When should a lessor recognize in income a nonrefundable lease bonus paid by a lessee?
a. When received
b. At the inception of the lease
c. At the lease expiration
d. Over the lease term
d. Over the lease term
Lease payments under an operating lease shall be recognized as income by the lessor on:
a. Straight-line basis over the lease term
b. Diminishing balance basis
c. Sum of units basis
d. Cash basis
a. Straight-line basis over the lease term
In an operating lease that is recorded by the lessor, the equal monthly rental payments should be:
a. Recorded as a reduction of depreciation.
b. Allocated between reduction in lease receivable and interest expense.
c. Recorded as a reduction in the lease receivable.
d. Recorded as rental income.
d. Recorded as rental income.
Which statement characterizes an operating lease?
a. The lessee records depreciation and interest.
b. The lessee records a lease obligation.
c. The lessor transfers title of the underlying asset to the lessee for the duration of the lease term.
d. The lessor records depreciation and lease revenue.
d. The lessor records depreciation and lease revenue.
The classification of a lease is normally carried out:
a. At the end of the lease term
b. After a “cooling off” period of one year
c. At the inception of the lease
d. When the entity deems it to be necessary
c. At the inception of the lease.
The classification of a lease as either an operating or finance lease on the part of the lessor is based on:
a. The length of the lease
b. The transfer of the risks and rewards of ownership
c. The lease payments being at least 50% of fair value
d. The economic life of the underlying asset
b. The transfer of the risks and rewards of ownership
All of the following situations would prima facie lead to a lease being classified as a finance lease, except:
a. Transfer of ownership to the lessee
b. Option to purchase at a value below the fair value of the underlying asset
c. The lease term is for a major part of the asset’s life
d. The present value of the lease payments is 50% of the fair value of the asset
d. The present value of the lease payments is 50% of the fair value of the asset
In the case of a lease of land and building, the lease payments should be split:
a. According to the relative fair value of the two elements
b. Based on the useful life of the two elements
c. Using the sum of digits method
d. According to a method devised by the entity
a. According to the relative fair value of the two elements
Where there is a lease of land and building and the title to the land is not transferred, generally the lease is treated as if:
a. The land is a finance lease
b. The land is finance and the building is operating
c. The land is operating and the building is finance
d. The land and building are an operating lease
c. The land is operating and the building is finance.
The accounting concept that is principally used to classify leases into operating and finance on the part of the lessor is:
a. Substance over form
b. Prudence
c. Neutrality
d. Completeness
a. Substance over form
Which statement is correct regarding the lease capitalization criteria?
a. The lease transfers ownership to the lessor
b. The lease contains a purchase option
c. The lease term is equal to at least 75% of the economic life of the underlying asset
d. The lease payments are at least 90% of the fair value of the asset
c. The lease term is equal to at least 75% of the economic life of the underlying asset
Which condition would require lease capitalization?
a. The lease does not transfer title to the lessee
b. There is an uncertain purchase option
c. The present value of the lease payments is significantly more than the fair value of the asset
d. The lease term is below the useful life of the asset
c. The present value of the lease payments is significantly more than the fair value of the asset
One of the four determinative criteria for a finance lease specifies that the lease term be equal to or greater than:
a. The economic life of the underlying asset
b. 90 percent of the economic life of the asset
c. 75 percent of the economic life of the asset
d. 50 percent of the economic life of the asset
c. 75 percent of the economic life of the asset
One of the four determinative criteria for a FINANCE LEASE is that the present value at the beginning of the lease term of the lease payments equals or exceeds:
a. The fair value of the underlying asset
b. 90 percent of the fair value of the underlying asset
c. 75 percent of the fair value of the underlying asset
d. 50 percent of the fair value of the underlying asset
b. 90 percent of the fair value of the underlying asset
