1. Question 1 How is a guaranteed residual value accounted for when computing minimum lease payments?
2. It is ignored.
3. The present value of the guaranteed residual value is added in to determine the minimum lease payments.
4. The future value of the guaranteed residual value is added in to determine the minimum lease payments.
5. The excess of guaranteed residual value over estimated residual value is added in to determine the minimum lease payments.

10 points

Question 2

1. Which of the following is a disclosure that a lessor must make within its financial statements?
2. the original cost of assets held and leased to others under operating leases
3. components of the net investment in both sales-type and direct-finance capital leases
4. aggregated minimum lease payments for the next five years
5. future minimum lease payments on both cancellable and non-cancellable operating leases

10 points

Question 3

1. A noncancellable lease contains a bargain purchase option. The fair value of the asset is greater than the lessor's cost. Collectability of the lease payments is reasonably assured, and no material uncertainties about future costs exist. How will the lessor account for the lease?
2. guaranteed lease
3. sales-type lease
4. operating lease
5. direct financing lease

10 points

Question 4

1. For a lease to be classified as a capital lease, the lease term must be greater than or equal to ________.
2. 75% of the expected economic life of the leased property
3. 90% of the expected economic life of the leased property
4. 80% of the expected economic life of the leased property
5. 50% of the expected economic life of the leased property

10 points

Question 5

1. If a capital lease has a guaranteed residual value, how should the lessee account for it at the inception of the lease?
2. The initial asset and liability should be increased by the amount of the residual value.
3. The initial asset and liability should be decreased by the amount of the residual value.
4. The initial asset and liability should be increased by the present value of the residual value.
5. The initial asset and liability should be decreased by the present value of the residual value.

10 points

Question 6

1. When using the multiplier approach to lease capitalization, which of the following isnota factor that must be estimated?
2. interest expense
3. fair value of the leased asset
4. rent expense
5. depreciation expense

10 points

Question 7

1. Which of the following statements are correct regarding an operating lease?
2. The lessee receives title to the asset at the end of the lease.
3. The lessor records depreciation expense and lease revenue.
4. The lessee records the leased asset as a long-term asset.
5. The lessee records interest expense.

10 points

Question 8

1. SuperByte Corporation
3. Superbyte Corporation sells photographic equipment. Superbyte leases equipment to Laguna Madre Company on January 1 of the current year. The cost to manufacture the equipment was $12 million.
5. The lease agreement between SuperByte and Laguna Madre had the follow terms:
6. 1. The lease is noncancellable.
7. 2. The lease has no residual value or bargain purchase option.
8. 3. The lease term is 8 years; payments are made semiannually.
9. 4. Depreciation is recorded each December 31 using the straight-line approach.
10. 5. The economic life of the equipment is 8 years.
11. 6. The lessee's incremental borrowing rate and the implicit interest rate are both 12% annually.
12. 7. The lease payments are $1,493,617 semiannually. The first payment is due at the inception of the lease; subsequent payments are made every July 1 and January 1.
13. 8. The fair value of the equipment at the inception of the lease is $16,000,000.
16. Refer to Superbyte Corporation.
17. Superbyte Corporation sells photographic equipment. Superbyte leases equipment to Laguna Madre Company on January 1 of the current year. The cost to manufacture the equipment was $12 million. The lease agreement between SuperByte and Laguna Madre had the follow terms:
19. 1. The lease is noncancellable.
21. 2. The lease has no residual value or bargain purchase option.
23. 3. The lease term is 8 years; payments are made semiannually.
25. 4. Depreciation is recorded each December 31 using the straight-line approach.
27. 5. The economic life of the equipment is 8 years.
29. 6. The lessee's incremental borrowing rate and the implicit interest rate are both 12% annually.
31. 7. The lease payments are $1,493,617 semiannually. The first payment is due at the inception of the lease; subsequent payments are made every July 1 and January 1.
33. 8. The fair value of the equipment at the inception of the lease is $16,000,000.
36. VARIABLES:
39. What is the interest revenue that SuperByte will report on this lease in its current year income statement?
40. $1,822,028
41. $1,887,983
42. $1,626,340
43. $1,703,372

10 points

Question 9

1. When a lessor records a sales-type lease, the transaction is similar to ________.
2. exchanging assets
3. selling a fixed asset
4. selling merchandise on account
5. purchasing merchandise on account

10 points

Question 10

1. Which of the following factors is most indicative that a lease should be recorded as a a finance lease under IFRS?
2. The present value of the minimum lease payments is at least equal to the majority of the cost of the property at the lease's inception.
3. The leased asset can be transferred to a subsequent owner during the course of the lease.
4. Ownership of the property is transferred to the lessee at the end of the lease.
5. The lease term equals at least 50% of the economic life of the asset.