$5$

$15.$ Vista Co$.$ just signed a four year service contract with the local telephone company. As part of the service contract Vista will receive a telephone server for their use under the contract. Vista will receive all the benefits of the server and will fully control the server while it being used under the service contract terms. The telephone company has the option to swap out the server with a new one whenever the telephone company desires.

a$.$ The part of the contract related to the server is considered a leased piece of equipment and it must be capitalized on Vista's books under lease accounting standards.

b$.$ The part of the contract related to the server is not considered a leased piece of equipment and they are not required to capitalize it under lease accounting standards.

c$.$ Since the server is part of a service contract Vista does not need to consider lease accounting standards when accounting for this contract.

d$.$ None of the above are correct.

$16.$ Which of the following statement best describes the difference between the new lease standards issued as GAAP and the one issued as the international IFRS?

a$.$ GAAP requires that both operating and finance leases be capitalized while IFRS requires only finance leases to be capitalized.

b$.$ IFRS requires that at the end of each period Interest Expense and Asset Amortization expense be computed and recorded separately for both types of leases while GAAP requires that a single lease expense be recorded for both types of leases.

c$.$ IFRS requires that at the end of each period Interest Expense and Asset Amortization expense be computed and recorded separately for both types of leases while GAAP requires that a single lease expense be recorded for operating leases and individual Interest Expense and Asset Amortization expenses be recorded for finance leases.

d$.$ GAAP requires operating leases to be capitalized, but finance leases do not need to be capitalized and IFRS requires both types of leases to be capitalized.

e$.$ More than one of the above is true.

$17.$ The Staay Company is a lessee that has just signed a lease that is classified as an finance lease. The present value of the lease payments is $$100,000.$ However, they made a prepayment of $$10,000$ prior to the start of the lease. They also incurred Initial Direct Costs in the amount of $$4,000.$ What is the amount they should record as the ROU Asset at the inception of the lease?

a$.$ $$100,000$

b$.$ $$110,000$

c$.$ $$94,000$

d$.$ $$106,000$

e$.$ $$114,000$