Exam 18: Extension: Ol Accounting for Leases Current Standard

For a direct-finance capital lease, the lease receivable is the present value of the minimum lease payments plus an element of gross profit.

U.S. GAAP and IFRS accounting is the same with regard to the lessor accounting for capital leases.

Betz Corporation entered into a capital lease on January 1 of the current year. The lease is for 8 years and calls for the first payment to be made at the inception. The first annual minimum lease payment will contain which of the following components?

Under a capital lease, the lessee reports rent expense on the income statement.

How is a guaranteed residual value accounted for when computing minimum lease payments?

Under a direct-finance capital lease, a lessor recognizes both interest revenue and gross profit.

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 $14,000,000. The lease agreement between SuperByte and Laguna Madre had the follow terms: 1. The lease is noncancellable. 2) The lease has no residual value or bargain purchase option. 3) The lease term is 8 years; payments are made semiannually. 4) Depreciation is recorded each December 31 using the straight-line approach. 5) The economic life of the equipment is 8 years. 6) The lessee's incremental borrowing rate and the implicit interest rate are both 12% annually. 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. 8) The fair value of the equipment at the inception of the lease is $16,000,000. What amount of depreciation will Laguna Madre record in its income statement on December 31 of the current year?

What is the cost basis of an asset acquired under a capital lease?

Under a capital lease, the lessee reports both interest expense and depreciation expense associated with the lease.

The amount of minimum lease payments includes executory costs required to be paid by the lessee.

Under IFRS, the lessee's required disclosures include required lease payments for both operating and capital leases for each of the next five years and the remainder payments in aggregate.

Which of the following is a financial disclosure that a lessee must make on its financial statements?

What is the proper accounting treatment for leasehold improvements for the lessee?

If the lease term must be greater than or equal to ________, the lessee will record the lease as a capital lease.

Miller Company leases office equipment from Swanson Company. The fair value of the equipment exceeds Swanson's cost. Collectability of the lease payments is reasonably assured; there are no material uncertainties surrounding the lease. Additionally, there is a bargain purchase option. Swanson will account for the lease as a(n) ________.

For an operating lease, the lessor maintains the leased asset on its balance sheet and records depreciation expense each period unless the asset is fully depreciated.

Under IFRS, a capital lease is referred to as a finance lease.

Under U.S. GAAP, the lessor disclosure requirements include total future minimum lease payments for all operating leases.

If a capital lease has a guaranteed residual value, how should the lessee account for it at the inception of the lease?

Which of the following is not among the criteria used by a lessee to classify a lease as a capital lease?