Homework Answers
Answer is (a) 90%
In order to qualify as a sales-type lease, the lease must transfer ownership to the lessee, include an option for the lessee to buy the equipment at a reduced price, extend at least 75 percent of the equipment’s life or have minimum lease payments for which the present value equals at least 90 percent of the equipment’s fair market value. A sales-type lease must also provide a profit for the lessor.
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One of the criteria for a lease to be classified as a sales-type lease by the...
Which of the following lease criteria would not qualify a lease as a capital lease? Multiple...
Which of the following lease criteria would not qualify a lease as a capital lease? Multiple Choice The lease term is equal to or greater than 75% of the estimated economic life of the leased property. The lease transfers ownership of the property to the lessee by the end of the lease term. The present value of the minimum lease payments equals or exceeds 90% of the fair value of the leased property. The lease contains an option to purchase...
Which of the following is not a sufficient criterion for a lessor to classify a lease...
Which of the following is not a sufficient criterion for a lessor to classify a lease as a sales-type lease? Multiple Choice The lease transfers Ownership of the leased asset to the lessee at the end of the lease term. O The lessee has the option of acquiring the asset during or at the end of the lease term at a bargain price. O The present value of the lease payments is greater than the carrying value of the leased...
When a lessee makes an entry at the beginning of a lease, which of the following are included in the amount that will be...
When a lessee makes an entry at the beginning of a lease, which of the following are included in the amount that will be recorded as both a right-of-use asset and a lease liability? (Select all that apply.) Fair value of the asset leased Present value of a cash payment expected to be made at the end of the lease term because of a guaranteed residual value Present value of expected residual value Present value of periodic lease payments Sum...
Lessor Sales Company and Lessee Manufacturing Company agreed to a noncancelable lease. The follow...
Lessor Sales Company and Lessee Manufacturing Company agreed to a noncancelable lease. The following in- formation is available to both entities regarding the lease terms and the leased asset. I. Lessor's cost of the leased asset was $30,000. The asset was new at the inception of the lease term. 2. Lease term is three years starting January 1,2020 3. Estimated useful life of the leased asset is six years. Estimated residual value at end of six years is zero. 4....
When a lessee makes an entry at the beginning of a lease, which of the following...
When a lessee makes an entry at the beginning of a lease, which of the following are included in the amount that will be recorded as both a right-of-use asset and a lease liability? (Select all that apply.) Check All That Apply Fair value of the asset leased Fair value of the asset leased Present value of a cash payment expected to be made at the end of the lease term because of a guaranteed residual value Present value of...
Revenue for a sales−type lease is the lower of A. the fair value of the leased...
Revenue for a sales−type lease is the lower of A. the fair value of the leased asset or the sum of the lease receivable and any lease payments paid before the lease commencement date B. the present value of the leased asset or the sum of the lease payable and any lease payments paid before the lease commencement date C. the fair value of the leased asset or the sum of the lease receivable and lease payments paid after the...
25. Which of the following is a one of the criteria for recording a lease as...
25. Which of the following is a one of the criteria for recording a lease as a finance lease, under IFRS? A) B) C) D) The lease term is for the major part of the economic life of the asset. The lease must be cancelable. The lease doesn't contain a bargain-purchase option. The present value of the minimum, lease payments amounts to 75% of the fair value of the leased asset.
Problem 1: The following facts pertain to a non-cancelable lease agreement between Lessee and Lessor: Date...
Problem 1: The following facts pertain to a non-cancelable lease agreement between Lessee and Lessor: Date of the Lease 12/31/Yro Annual lease payment (Payment 1 due immediately) (Present Value =$6,684) $2,338 Guaranteed Residual Value (Lessee expects to meet) (Present Value $1,316) $1,523 Lease Term 3 years Economic Life of Leased Asset 5 years Lessor's Cost of the asset $6,000 Fair Value of the asset $8,000 Lessor's Implicit Rate & Lessee's Incremental Borrowing Rate The collectability of the lease payments by...
The following information is available for a noncancelable lease of equipment that is classified as a...
The following information is available for a noncancelable lease of equipment that is classified as a sales-type lease by the lessor and as a capital lease by the lessee. Assume that the lease payments are made at the beginning of each month, interest and straight-line depreciation are recognized at the end of each month, and the residual value of the leased asset is zero at the end of a 3-year life. Cost of equipment to lessor (Anson Company) $50,000 Initial...
Assume that Tropical has reasonable assurance that Bayview will make the remaining lease payments. All costs...
Assume that Tropical has reasonable assurance that Bayview will make the remaining lease payments. All costs of operating the leased equipment are borne by Bayview. Assume that both companies have a December 31st year end. Answer the following relative to the above information. Criteria Assessment 1. Does the lessee have the option to purchase the asset at a price that is expected to be substantially lower than the fair value at the date the option becomes exercisable? 2. Is the...
Which of the following is not a sufficient criterion for a lessor to classify a lease as a sales-type lease? Multiple Choice The lease transfers Ownership of the leased asset to the lessee at the end of the lease term. O The lessee has the option of acquiring the asset during or at the end of the lease term at a bargain price. O The present value of the lease payments is greater than the carrying value of the leased...
Lessor Sales Company and Lessee Manufacturing Company agreed to a noncancelable lease. The following in- formation is available to both entities regarding the lease terms and the leased asset. I. Lessor's cost of the leased asset was $30,000. The asset was new at the inception of the lease term. 2. Lease term is three years starting January 1,2020 3. Estimated useful life of the leased asset is six years. Estimated residual value at end of six years is zero. 4....
25. Which of the following is a one of the criteria for recording a lease as a finance lease, under IFRS? A) B) C) D) The lease term is for the major part of the economic life of the asset. The lease must be cancelable. The lease doesn't contain a bargain-purchase option. The present value of the minimum, lease payments amounts to 75% of the fair value of the leased asset.
Problem 1: The following facts pertain to a non-cancelable lease agreement between Lessee and Lessor: Date of the Lease 12/31/Yro Annual lease payment (Payment 1 due immediately) (Present Value =$6,684) $2,338 Guaranteed Residual Value (Lessee expects to meet) (Present Value $1,316) $1,523 Lease Term 3 years Economic Life of Leased Asset 5 years Lessor's Cost of the asset $6,000 Fair Value of the asset $8,000 Lessor's Implicit Rate & Lessee's Incremental Borrowing Rate The collectability of the lease payments by...
Assume that Tropical has reasonable assurance that Bayview will make the remaining lease payments. All costs of operating the leased equipment are borne by Bayview. Assume that both companies have a December 31st year end. Answer the following relative to the above information. Criteria Assessment 1. Does the lessee have the option to purchase the asset at a price that is expected to be substantially lower than the fair value at the date the option becomes exercisable? 2. Is the...
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