Chapter 21 Quiz

Chapter 21 Quiz - 1. Which of the following is a correct...

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1.  Which of the following is a correct statement of one of the capitalization criteria?  A) The lease transfers ownership of the property to the lessor.  B) The lease contains a purchase option.  C) The lease term is equal to or more than 75% of the estimated economic life of the leased property.  D) The minimum lease payments (excluding executory costs) equal or exceed 90% of the fair value of the  leased property.  Points Earned:  3.0/3.0  Correct Answer(s): 2.  In computing the present value of the minimum lease payments, the lessee should  A) use its incremental borrowing rate in all cases.  B) use either its incremental borrowing rate or the implicit rate of the lessor, whichever is higher, assuming that 
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the implicit rate is known to the lessee.  C) use either its incremental borrowing rate or the implicit rate of the lessor, whichever is lower, assuming that  the implicit rate is known to the lessee.  D) none of these.  Points Earned:  3.0/3.0  Correct Answer(s): 3.  The primary difference between a direct-financing lease and a sales-type lease is the  A) manner in which rental receipts are recorded as rental income.  B) amount of the depreciation recorded each year by the lessor.  C) recognition of the manufacturer's or dealer's profit at the inception of the lease.  D) allocation of initial direct costs by the lessor to periods benefited by the lease arrangements.  Points Earned:  3.0/3.0  Correct Answer(s):
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This note was uploaded on 03/01/2010 for the course ACCT 30801E taught by Professor Darland during the Spring '10 term at Buena Vista.

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Chapter 21 Quiz - 1. Which of the following is a correct...

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