QUIZ 3 CFAS - FINALS

The lessee may apply the operating lease model under what condition?

• Short-term lease

• Low value lease

• Both short-term lease and low value lease

• Under all circumstances

A right of use asset is initially measured at

• Cost

• Fair value

• Current cost

• Present value of expected cash flow

Which is not included in lease payments?

• Any payment required by a purchase option that is reasonably certain to be exercised

• Costs for services and taxes paid by and lessee

• Required payments over the lease term

• Amount guaranteed by a party related to the lessee

If the residual value of an underlying asset is greater than the amount guaranteed by the lessee

• The lessor pays the lessee for the difference.

• The lessor recognizes a gain at the end of the lease.

• The lessee has no obligation related to the residual value.

• The lessee pays the lessor for the difference.

The lessee’s liability for a finance lease would be periodically reduced by

• Lease payment plus the depreciation of the asset

• Lease payment less the depreciation of the asset

• Lease payment less the portion allocable to interest

• Lease payment

When should a lessor recognize in income a nonrefundable lease bonus paid by a lessee on signing an operating lease?

• When received

• At the inception of the lease

• At the lease expiration

• Over the lease term

All of the following situations would prima facie lead to a lease being classified as a finance lease, except

• Transfer of ownership to the lessee at the end of the lease term

• Option to purchase at a value below the fair value of the underlying asset.

• The lease term is for a major part of the asset’s life.

• The present value of the lease payments is 50% of the fair value of the asset.

It is the date on which the lessee is entitled to exercise the right to use the underlying asset.

• Inception of the lease

• Commencement of the lease

• Date of lease agreement

• Date of commitment to the provisions of the lease

Gross investment in the lease is equal to

• Sum of the lease payments receivable by a lessor under a finance lease and any unguaranteed residual value accruing to the lessor.

• The lease payments under a finance lease of the lessor.

• Present value of lease payments under a finance lease of the lessor and any unguaranteed residual value.

• Present value of the lease payments under a finance lease of the lessor.

Net investment in a sales type lease is equal to

• Gross investment in the lease less unearned finance income

• Cost of the underlying asset

• The lease payments

• The lease payments less unguaranteed residual value