Exam_Sample_Questions - Sample of Previous Exams Problems...

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Sample of Previous Exams Problems: Leases and Investments Multiple-choice 1. The lessor capitalizes and amortizes initial direct costs for all types of leases except: a. direct-financing leases. b. operating leases. c. there are no exceptions. d. sales-type leases. 2. Johnson, Inc., leased an asset to Raymond Corporation. The cost of the asset to Johnson was $8,000. Terms of the lease specify four-year life for the lease, an annual interest rate of 15 percent, and four year-end rental payments. The lease qualifies as a capital lease and is classified as a direct-financing lease. The asset reverts to Johnson after the fourth year, when its residual value is estimated to be $1,000. The amount of each rental payment is a. $2,335. b. $2,000. c. $2,602 d. $2,501. 3. Nichols Enterprises has an investment in 25,000 shares of Elliott Electronics that Nichols accounts for as a security available for sale. Elliott shares are publicly traded on the New York Stock Exchange, and the Wall Street Journal quotes a price for those shares of $10/share, but Nichols believes the market has not appreciated the full value of the Elliott shares and that a more accurate price is $12/share. Nichols should carry the Elliott investment on their balance sheet at: A. $250,000. B. $275,000, the midpoint of Nichols's range of reasonably likely valuations of Elliott. C. $300,000. D. either $250,000 or $300,000, as either are defensible valuations. 4. Hawk Corporation purchased ten thousand shares of Diamond Corporation stock in 2006 for $50 per share and classified the investment as securities available for sale. Diamond's market value was $60 per share on
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Exam_Sample_Questions - Sample of Previous Exams Problems...

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