Accounting for Leases - CPA Financial Accounting and Reporting (FAR)
Card 1 of 24
Which of the following is not among the criteria that must be met to record a lease as a capital lease?
Which of the following is not among the criteria that must be met to record a lease as a capital lease?
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To record a lease as a capital lease, at least one of the following criteria must be met: ownership of the asset transfers at the end of the lease term; the lease contains a bargain purchase option; the PV of the lease payments is at least 90% of the FV at inception; and the lease term is at least 75% of the asset's useful life.
To record a lease as a capital lease, at least one of the following criteria must be met: ownership of the asset transfers at the end of the lease term; the lease contains a bargain purchase option; the PV of the lease payments is at least 90% of the FV at inception; and the lease term is at least 75% of the asset's useful life.
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The Global Group leases an asset from Earth Co for 8 years. The life of the asset is expected to be 10 years. If the lease does NOT contain a bargain purchase option or a transfer of title, which of the following is correct?
The Global Group leases an asset from Earth Co for 8 years. The life of the asset is expected to be 10 years. If the lease does NOT contain a bargain purchase option or a transfer of title, which of the following is correct?
Tap to reveal answer
In a lease does not contain a bargain purchase option, the asset will be depreciated over the life of the lease, rather than over the useful life of the asset.
In a lease does not contain a bargain purchase option, the asset will be depreciated over the life of the lease, rather than over the useful life of the asset.
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In Year 3, Meyer Corp sold an asset for $900,000 to Sailer Corp and simultaneously leased it back for 5 years. The assets remaining life was 53 years, and the carrying value on the date of the sale was $640,000. The annual lease payments were $180,000 per year. How much gain should be recognized by Meyer in Year 3?
In Year 3, Meyer Corp sold an asset for $900,000 to Sailer Corp and simultaneously leased it back for 5 years. The assets remaining life was 53 years, and the carrying value on the date of the sale was $640,000. The annual lease payments were $180,000 per year. How much gain should be recognized by Meyer in Year 3?
Tap to reveal answer
The gain recognized will be equal to the purchase price of the asset minus the asset's carrying value on the date of the sale. The full gain will be recognized at the time of the sale.
The gain recognized will be equal to the purchase price of the asset minus the asset's carrying value on the date of the sale. The full gain will be recognized at the time of the sale.
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ABC leased equipment to DEF under a noncancellable lease with a transfer of title. Will ABC record depreciation expense on the leased asset and interest revenue related to the lease?
ABC leased equipment to DEF under a noncancellable lease with a transfer of title. Will ABC record depreciation expense on the leased asset and interest revenue related to the lease?
Tap to reveal answer
DEF will capitalize the lease due to the transfer of title and will incur both depreciation and interest expense.
DEF will capitalize the lease due to the transfer of title and will incur both depreciation and interest expense.
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A firm sold its headquarters building at a gain, and simultaneously leased back the building. The lease was reporting as a finance lease under US GAAP. At the time of sale, the sale-leaseback will be considered:
A firm sold its headquarters building at a gain, and simultaneously leased back the building. The lease was reporting as a finance lease under US GAAP. At the time of sale, the sale-leaseback will be considered:
Tap to reveal answer
If the underlying lease in a sale leaseback is a finance lease, it is considered equivalent to a repurchase and will therefore be considered a failed sale.
If the underlying lease in a sale leaseback is a finance lease, it is considered equivalent to a repurchase and will therefore be considered a failed sale.
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During which period of time should a lessee amortize a leased property? The lease is a finance lease and contains a written option to purchase.
During which period of time should a lessee amortize a leased property? The lease is a finance lease and contains a written option to purchase.
Tap to reveal answer
When dealing with a financing lease, the lessee should amortized the leased property over the economic life of the asset when there is a written purchase option or at the time the lessee obtains ownership of the asset.
When dealing with a financing lease, the lessee should amortized the leased property over the economic life of the asset when there is a written purchase option or at the time the lessee obtains ownership of the asset.
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Which of the following is not among the criteria that must be met to record a lease as a capital lease?
Which of the following is not among the criteria that must be met to record a lease as a capital lease?
Tap to reveal answer
To record a lease as a capital lease, at least one of the following criteria must be met: ownership of the asset transfers at the end of the lease term; the lease contains a bargain purchase option; the PV of the lease payments is at least 90% of the FV at inception; and the lease term is at least 75% of the asset's useful life.
To record a lease as a capital lease, at least one of the following criteria must be met: ownership of the asset transfers at the end of the lease term; the lease contains a bargain purchase option; the PV of the lease payments is at least 90% of the FV at inception; and the lease term is at least 75% of the asset's useful life.
← Didn't Know|Knew It →
The Global Group leases an asset from Earth Co for 8 years. The life of the asset is expected to be 10 years. If the lease does NOT contain a bargain purchase option or a transfer of title, which of the following is correct?
The Global Group leases an asset from Earth Co for 8 years. The life of the asset is expected to be 10 years. If the lease does NOT contain a bargain purchase option or a transfer of title, which of the following is correct?
Tap to reveal answer
In a lease does not contain a bargain purchase option, the asset will be depreciated over the life of the lease, rather than over the useful life of the asset.
In a lease does not contain a bargain purchase option, the asset will be depreciated over the life of the lease, rather than over the useful life of the asset.
← Didn't Know|Knew It →
In Year 3, Meyer Corp sold an asset for $900,000 to Sailer Corp and simultaneously leased it back for 5 years. The assets remaining life was 53 years, and the carrying value on the date of the sale was $640,000. The annual lease payments were $180,000 per year. How much gain should be recognized by Meyer in Year 3?
In Year 3, Meyer Corp sold an asset for $900,000 to Sailer Corp and simultaneously leased it back for 5 years. The assets remaining life was 53 years, and the carrying value on the date of the sale was $640,000. The annual lease payments were $180,000 per year. How much gain should be recognized by Meyer in Year 3?
Tap to reveal answer
The gain recognized will be equal to the purchase price of the asset minus the asset's carrying value on the date of the sale. The full gain will be recognized at the time of the sale.
The gain recognized will be equal to the purchase price of the asset minus the asset's carrying value on the date of the sale. The full gain will be recognized at the time of the sale.
← Didn't Know|Knew It →
ABC leased equipment to DEF under a noncancellable lease with a transfer of title. Will ABC record depreciation expense on the leased asset and interest revenue related to the lease?
ABC leased equipment to DEF under a noncancellable lease with a transfer of title. Will ABC record depreciation expense on the leased asset and interest revenue related to the lease?
Tap to reveal answer
DEF will capitalize the lease due to the transfer of title and will incur both depreciation and interest expense.
DEF will capitalize the lease due to the transfer of title and will incur both depreciation and interest expense.
← Didn't Know|Knew It →
A firm sold its headquarters building at a gain, and simultaneously leased back the building. The lease was reporting as a finance lease under US GAAP. At the time of sale, the sale-leaseback will be considered:
A firm sold its headquarters building at a gain, and simultaneously leased back the building. The lease was reporting as a finance lease under US GAAP. At the time of sale, the sale-leaseback will be considered:
Tap to reveal answer
If the underlying lease in a sale leaseback is a finance lease, it is considered equivalent to a repurchase and will therefore be considered a failed sale.
If the underlying lease in a sale leaseback is a finance lease, it is considered equivalent to a repurchase and will therefore be considered a failed sale.
← Didn't Know|Knew It →
During which period of time should a lessee amortize a leased property? The lease is a finance lease and contains a written option to purchase.
During which period of time should a lessee amortize a leased property? The lease is a finance lease and contains a written option to purchase.
Tap to reveal answer
When dealing with a financing lease, the lessee should amortized the leased property over the economic life of the asset when there is a written purchase option or at the time the lessee obtains ownership of the asset.
When dealing with a financing lease, the lessee should amortized the leased property over the economic life of the asset when there is a written purchase option or at the time the lessee obtains ownership of the asset.
← Didn't Know|Knew It →
Which of the following is not among the criteria that must be met to record a lease as a capital lease?
Which of the following is not among the criteria that must be met to record a lease as a capital lease?
Tap to reveal answer
To record a lease as a capital lease, at least one of the following criteria must be met: ownership of the asset transfers at the end of the lease term; the lease contains a bargain purchase option; the PV of the lease payments is at least 90% of the FV at inception; and the lease term is at least 75% of the asset's useful life.
To record a lease as a capital lease, at least one of the following criteria must be met: ownership of the asset transfers at the end of the lease term; the lease contains a bargain purchase option; the PV of the lease payments is at least 90% of the FV at inception; and the lease term is at least 75% of the asset's useful life.
← Didn't Know|Knew It →
The Global Group leases an asset from Earth Co for 8 years. The life of the asset is expected to be 10 years. If the lease does NOT contain a bargain purchase option or a transfer of title, which of the following is correct?
The Global Group leases an asset from Earth Co for 8 years. The life of the asset is expected to be 10 years. If the lease does NOT contain a bargain purchase option or a transfer of title, which of the following is correct?
Tap to reveal answer
In a lease does not contain a bargain purchase option, the asset will be depreciated over the life of the lease, rather than over the useful life of the asset.
In a lease does not contain a bargain purchase option, the asset will be depreciated over the life of the lease, rather than over the useful life of the asset.
← Didn't Know|Knew It →
In Year 3, Meyer Corp sold an asset for $900,000 to Sailer Corp and simultaneously leased it back for 5 years. The assets remaining life was 53 years, and the carrying value on the date of the sale was $640,000. The annual lease payments were $180,000 per year. How much gain should be recognized by Meyer in Year 3?
In Year 3, Meyer Corp sold an asset for $900,000 to Sailer Corp and simultaneously leased it back for 5 years. The assets remaining life was 53 years, and the carrying value on the date of the sale was $640,000. The annual lease payments were $180,000 per year. How much gain should be recognized by Meyer in Year 3?
Tap to reveal answer
The gain recognized will be equal to the purchase price of the asset minus the asset's carrying value on the date of the sale. The full gain will be recognized at the time of the sale.
The gain recognized will be equal to the purchase price of the asset minus the asset's carrying value on the date of the sale. The full gain will be recognized at the time of the sale.
← Didn't Know|Knew It →
ABC leased equipment to DEF under a noncancellable lease with a transfer of title. Will ABC record depreciation expense on the leased asset and interest revenue related to the lease?
ABC leased equipment to DEF under a noncancellable lease with a transfer of title. Will ABC record depreciation expense on the leased asset and interest revenue related to the lease?
Tap to reveal answer
DEF will capitalize the lease due to the transfer of title and will incur both depreciation and interest expense.
DEF will capitalize the lease due to the transfer of title and will incur both depreciation and interest expense.
← Didn't Know|Knew It →
A firm sold its headquarters building at a gain, and simultaneously leased back the building. The lease was reporting as a finance lease under US GAAP. At the time of sale, the sale-leaseback will be considered:
A firm sold its headquarters building at a gain, and simultaneously leased back the building. The lease was reporting as a finance lease under US GAAP. At the time of sale, the sale-leaseback will be considered:
Tap to reveal answer
If the underlying lease in a sale leaseback is a finance lease, it is considered equivalent to a repurchase and will therefore be considered a failed sale.
If the underlying lease in a sale leaseback is a finance lease, it is considered equivalent to a repurchase and will therefore be considered a failed sale.
← Didn't Know|Knew It →
During which period of time should a lessee amortize a leased property? The lease is a finance lease and contains a written option to purchase.
During which period of time should a lessee amortize a leased property? The lease is a finance lease and contains a written option to purchase.
Tap to reveal answer
When dealing with a financing lease, the lessee should amortized the leased property over the economic life of the asset when there is a written purchase option or at the time the lessee obtains ownership of the asset.
When dealing with a financing lease, the lessee should amortized the leased property over the economic life of the asset when there is a written purchase option or at the time the lessee obtains ownership of the asset.
← Didn't Know|Knew It →
Which of the following is not among the criteria that must be met to record a lease as a capital lease?
Which of the following is not among the criteria that must be met to record a lease as a capital lease?
Tap to reveal answer
To record a lease as a capital lease, at least one of the following criteria must be met: ownership of the asset transfers at the end of the lease term; the lease contains a bargain purchase option; the PV of the lease payments is at least 90% of the FV at inception; and the lease term is at least 75% of the asset's useful life.
To record a lease as a capital lease, at least one of the following criteria must be met: ownership of the asset transfers at the end of the lease term; the lease contains a bargain purchase option; the PV of the lease payments is at least 90% of the FV at inception; and the lease term is at least 75% of the asset's useful life.
← Didn't Know|Knew It →
The Global Group leases an asset from Earth Co for 8 years. The life of the asset is expected to be 10 years. If the lease does NOT contain a bargain purchase option or a transfer of title, which of the following is correct?
The Global Group leases an asset from Earth Co for 8 years. The life of the asset is expected to be 10 years. If the lease does NOT contain a bargain purchase option or a transfer of title, which of the following is correct?
Tap to reveal answer
In a lease does not contain a bargain purchase option, the asset will be depreciated over the life of the lease, rather than over the useful life of the asset.
In a lease does not contain a bargain purchase option, the asset will be depreciated over the life of the lease, rather than over the useful life of the asset.
← Didn't Know|Knew It →