1.

Guilford Co. has leased property and accounted for the transaction as a finance lease. No salvage value exists. The amount recorded initially by the lessor as a lease receivable should normally:

Select one:

a. Equal the total of the minimum lease payments

b. Exceed the total of the minimum lease payments

c. Equal the present value of the minimum lease payments at the beginning of the lease

d. Exceed the present value of the minimum lease payments at the beginning of the lease

2.

A 12-year finance lease specifies equal minimum annual lease payments. Part of this payment represents interest and part represents a reduction in the net lease liability. The portion of the minimum lease payment in Year 10 applicable to interest should be:

Select one:

a. Less than in Year 8

b. More than in Year 8

c. The same as in Year 12

d. Less than in Year 12

3.

Assume a finance lease. Indicate if the lessee or the lessor will be recording amortization expense and interest revenue.

Select one:

a. Lessee records amortization expense, lessor records interest revenue

b. Lessor records amortization expense, lessee records interest revenue

c. The lessor records both amortization expense and interest revenue

d. The lessee records both amortization expense and interest revenue