C C 36 37 38 39 40 41 42 43 44 45 46 47 49 50 35" Assuming U.S. GAAP and given no other information on the terms of the lease, the lessee will account for a lease as operating in all of the following situations, except O There is no written purchase option. O Ownership does not transfer at the end of the lease. The lease term is equal to 70% of the economic life of the asset. The present value of the minimum lease payments is equal to 95% of fair value. C N 8 26 27 28 29 30 31 32 33 34 137" CALC EXCEL OVERVIEW HELP 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 Lease A does not contain a purchase option, but the lease term is equal to 90 percent of the estimated economic life of the leased property. Lease B does not transfer ownership of the property to the lessee by the end of the lease term, but the lease term is equal to 75 percent of the estimated economic life of the leased property. How should the lessee classify these leases under U.S. GAAP? Lease A Operating lease Lease B Finance lease Operating lease Operating lease Finance lease Finance lease C hp O 06 & * O 49 50 138" Oak Co. leased equipment for its entire nine-year useful life, agreeing to pay $50,000 at the start of the lease term on December 31, Year 1, and $50,000 annually on each December 31 for the next eight years. The present value on December 31, Year 1, of the nine lease payments over the lease term, using the rate implicit in the lease which Oak knows to be 10%, was $316,500. Ther December 31, Year 1, present value of the lease payments using Oak's incremental borrowing rate of 12% was $298,500. Oak made a timely second lease payment. What amount should Oak report as a lease liability in its December 31, Year 2, balance sheet? Toft Co. had 120,000 shares of common stock outstanding at January 1. On April 1, it issued 40,000 additional shares of common stock. Outstanding all year were 10,000 shares of nonconvertible preferred stock on which a dividend of $5 per share was declared during the year. Net income for the year was $480,000. What should Toft report as earnings per share for the year? $2.69 Able Co. leased equipment to Baker under a noncancellable lease with a transfer of title. Will Able record depreciation expense on the leased asset and interest revenue related to the lease? Depreciation Interest expense revenue Yes Yes Yes No No No No Yes C Under U.S. GAAP, one criterion for a finance lease classification is that the term of the lease represents the major part of the leased property's estimated economic life at the inception of the lease. What is a reasonable minimum threshold percentage for representing a "major part of the asset's economic life? O 51% O 75% O 80% 90%