1. Which of the following statements about an operating lease is false? a. The lessor is responsible...

Question:

1. Which of the following statements about an operating lease is false?
a. The lessor is responsible for maintaining the asset.
b. The lessee is responsible for maintaining the asset.
c. An operating lease is usually a full-service lease.
d. Payments of one operating lease term are usually not enough to fully cover the asset cost.

2. Financial leases are:
a. Leases for which the lessees are responsible for maintenance of the assets.
b. Short-term leases.
c. Leases for which the lessors are responsible for maintenance of the assets.
d. Leases that cover less than 75 percent of the economic life of the asset.

3. Which of the following statements about leveraged leases is false?
a. The lease involves an external lender, lessor, and lessee.
b. The lender receives interest payments from the lessee.
c. The lessee can bargain for lower lease payments if the market is competitive.
d. The lender has the first lien on the leased asset.

4. Which of the following organizations is most likely to enter into a sale and leaseback agreement?
a. Factory
b. University
c. Investment firm
d. Real estate firm

5. Which of the following leases is classified as a financial lease?
a. The lessee could purchase the asset at $90,000, while the market value of the asset is
$81,000 when the lease expires.
b. The lease term is 7.5 years and the economic life of the asset is 9 years.
c. The lease does not transfer the ownership of the asset to the lessee when the lease expires.
d. In the lease inception, the fair market value of the assets is $70,000, while the present value of the lease payments is $58,000.

6. Given the following operating lease information, what is the asset/liability recognized on the lessee’s at the beginning of the lease? Minimum annual lease payment at the beginning of each year = $15,000; lease term = 7 years; appropriate = 5 percent; = $0.
a. $72,293.62
b. $78,765.45
c. $0
d. $88,517.01

7. Given the following information, what is the asset/liability recognized on the lessee’s at the beginning of the lease? = $0; minimum annual lease payment at the beginning of each year = $15,000; lease term = 5 years; appropriate = 5 percent.
a. $68,189.26
b. $64,942.15
c. $58,764.46
d. $75,000.00

8. Which of the following is higher under operating leases?
a. NI and CFO
b. NI in the early years and CFF
c. Depreciation and NI
d. Total cash flow and CFO

9. Under financial leases, the following ratio is higher compared with that for an operating lease:
a. Current ratio
b. Leverage ratio
c. NI margin
d. ROE

10. Which of the following financial figures is unchanged regardless of the type of lease?
a. Leverage ratio
b. P/E ratio
c. Total cash flow
d. Asset turnover

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