21 - Pre-Lecture, Question 1 Correct! Leases similar to...

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Unformatted text preview: Pre-Lecture, Question 1 Correct! Leases similar to installment purchases are capitalized. Which of the following best describes current practice in accounting for leases? Leases similar to installment purchases are capitalized. Leases are not capitalized. All long-term leases are capitalized. All leases are capitalized. Pre-Lecture, Question 2 Correct! In computing the present value of the minimum lease payments, the lessee should 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. In computing the present value of the minimum lease payments, the lessee should use its incremental borrowing rate in all cases. use either its incremental borrowing rate or the implicit rate of the lessor, whichever is higher, assuming that the implicit rate is known to the lessee. 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. none of these. Pre-Lecture, Question 3 Correct! Off-balance sheet financing is not a benefit to the lessor. Which of the following is not a benefit to the lessor? Off-balance sheet financing. High residual value. Interest revenue. Tax incentives. Pre-Lecture, Question 4 Correct! Leases that do not qualify as direct financing or sales-type leases are classified and accounted for as operating leases by the lessor. Any lease that does not qualify as a direct financing lease or a sales-type lease is classified and accounted for by the lessor as a(n) temporary lease. capital lease. residual lease. operating lease. Pre-Lecture, Question 5 Correct! Since a, b, and c are included, the best answer is d. Which of the following would not be included in the Lease Receivable account? All would be included Guaranteed residual value (if any). A bargain purchase option (if any). Penalty for failure to renew (if any). Pre-Lecture, Question 6 Correct! [$400,000 – ($40,000 × .50663)] ÷ 4.60478 = $82,465 Hite Company has a machine with a cost of $400,000 which also is its fair market value on the date the machine is leased to Rich Company. The lease is for 6 years and the machine is estimated to have an unguaranteed residual value of $40,000. If the lessor's interest rate implicit in the lease is 12%, the six beginning-of-the-year lease payments would be $92,361....
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This note was uploaded on 11/15/2010 for the course ACCT 401 taught by Professor Savage,g during the Fall '08 term at Winthrop.

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21 - Pre-Lecture, Question 1 Correct! Leases similar to...

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