Accounting 4001 True or false 3/19/2018 1. Finance leases are agreements that are formulated outwardly as leases, but are installment purchases in substance. 2. If the lease begins "at or near the end" of an asset's economic life, the criterion of the lease term being for the major part of the economic life does not apply when classifying the type of lease. This is consistent with the basic premise of this criterion that most of the risks and rewards of ownership occur prior to that time operating lease. operating lease fired. 3. If a lease requires the item be returned at the end of the lease it will be classified as an 4. Any lease for more than 25 years must be a sales type lease and can't be conside 5. In a defined benefit plan the employee will not forfeit all benefits if they quit or are 6. If benefits are increased retroactively (like you are paid 1.25% of last year's salary red an instead of just 1%) the increase in cost will be spread over future years and not require recomputation of prior years. 7. A company will expense annually the amount paid to the pension fund trustee based on that year's salary, not the amount actually paid to retired employees 8. Basic benefits are based on years worked and the longer you work the more benefit you receive, but post retirement benefits do not vary with length of service The balance in pension funds is reported as a long term asset in the balance sheet 10. Shares issued to employees under share compensation plans are current salary expense to the employer and current taxable income to the employee 11. If previous experience indicates that a material number of stock options will be forfeited before they vest, the fair value estimate of the options on the grant date should be adjusted to reflect that expectation 12. Current year stock dividends and splits require retroactive restatement of EPS for all prior years presented in comparative financial statements. 13. Preferred dividends are only factored into EPS when paid. If not paid in current year ignore them 14. Estimates of stock value on date options mature is made every year. Difference between strike price and anticipated value is adjusted annually 15. Restricted shares are issued to the employee now but must be held for a number of years before sale. The expense is all in the current year 16. There are no adjustments to EPS for non-convertible debentures. 17. Basic EPS must factor in shares issued or treasury shares purchased during the year 18. If the computation of diluted EPS will produce a greater per share earnings than basic EPS diluted EPS is not reported 19. There are 20,000 stock options for $40 outstanding. The price during the year was 20. If a part of the business is discontinued the EPS for that sector must be separately stated