WorksheetsRS: Accounting for Leases
Total questions: 24
Worksheet time: 23mins
Name
Class
Date
1.
If a lease provides for the transfer of ownership over the leased asset or a purchase option that is reasonably certain as to exercise
a)
a. the lessor shall depreciate the leased asset over its useful life
b)
b. the lessee shall depreciate the leased asset over the shorter of the asset's useful life and the remaining lease term
c)
c. the lessee shall depreciate the leased asset over its useful life
d)
d. both the lessee and the lessor shall depreciate the leased asset
2.
Which of the following will not be included in the net investment of the lessor?
a)
a. Lease payments
b)
b. Unguaranteed residual value
c)
c. Initial direct cost incurred by a manufacturer or a dealer
d)
d. Initial direct cost except for cost incurred by a manufacturer or a dealer
e)
3.
A lessor recognizes interest (finance) income on a finance lease in
a)
a. A decreasing manner
b)
b. An increasing manner
c)
c. Equal amounts each period
d)
d. Any of these
e)
4.
The basic accounting issue for a lessor is
a)
a. Revenue recognition during the lease term
b)
b. Computing depreciation over the lease term
c)
c. Expense recognition during the lease term
d)
d. Determination of the cost of the leased asset
5.
Which statement is correct regarding the lease capitalization criteria?
a)
a. The lease transfers ownership of the underlying asset to the lessor
b)
b. The lease contains a purchase option
c)
c. The lease term is equal to at least 75% of the economic life of the underlying asset
d)
d. The lease payments are at least 90% of the fair value of the underlying asset
6.
I. Lessors should recognize asset held under a finance lease in a statement of financial position as a receivable at an amount equal to the gross investment in the lease.
II. If right-of-use assets relate to a class of PPE to which the lessee applies the revaluation model in PAS 16, the lessee shall also apply the revaluation model to all of the right-of-use assets that relate to that class of PPE.
a)
a. Both statements are correct
b)
b. Both statements are incorrect
c)
c. Only I statement is correct
d)
d. Only II statement is correct
7.
On January 10, Kabahan Ka Na Company leased a truck for a four-year period, which will be returned to the lessor.
Annual lease payments every end of the year is amounting to P230,000, with a 5% discount rate.
If Kabahan Ka Na Company's revenue exceed a specified amount during the lease term, Kabahan Ka Na will pay an additional 20,000 lease payment at the end of the lease.
Kabahan Ka Na estimates a 60% probability of meeting the target revenue amount.
What amount, if any, should be added to the right-of-use asset and lease payable under the contingent rent agreement?
a)
a. An additional 10,000 should be added
b)
b. No additional amount should be added
c)
c. An additional 20,000 should be added
d)
d. An additional 12,000 should be added
8.
Lessors should recognize asset held under a finance lease in a statement of financial position as a receivable at an amount equal to the net investment in the lease.
a)
a. Residual value, whether guaranteed or unguaranteed
b)
b. Gross investment in the lease
c)
c. Gross rentals
d)
d. Net investment in the lease
9.
I. In an operating lease, assuming the exception were satisfied, the rent expense recognized by the lessee is always equal to the rent income recognized by the lessor.
II. In an operating lease, the annual payment of the lessee includes financing component of renting the asset over the lease term.
a)
a. Both statements are correct
b)
b. Both statements are incorrect
c)
c. Only statement I is correct
d)
d. Only statement II is correct
10.
I. Generally, low-value assets shall be fully depreciated the year of the purchase or in the period of acquisition
II. The gross profit amount in a dealer's lease is greater when a guaranteed residual value exists
a)
a. Both statements are correct
b)
b. Both statements are incorrect
c)
c. Only statement I is correct
d)
d. Only statement II is correct
11.
If the residual value of a leased asset is guaranteed solely by a party related to the lessor
a)
a. The third party is also liable for any lease payments not paid by the lessee
b)
b. It is treated by the lessor as an unguaranteed residual value
c)
c. Treated by the lessee as an unguaranteed residual value but by the lessor as a guaranteed residual
d)
d. The net investment to be recovered by the lessor is reduced
12.
If the supplier has substitution right
a)
a. A customer shall not account for the contract as a lease
b)
b. A customer shall account for the contract as a lease
c)
c. A customer shall account for the contract as a lease if it has right to direct the use of asset
d)
d. A customer shall account for the contract as a lease if the supplier substitution right is not substantive.
e)
Option 5
13.
Variable lease payments not included in the measurement of the lease liability at the commencement date shall be recognized in
a)
a. Other comprehensive income
b)
b. Added to the cost of the right of use asset and lease liability
c)
c. Accounted for retrospectively as an adjustment to the opening balance of retained earnings
d)
d. Profit or loss
14.
If the amount of decrease in the lease liability is higher than the carrying amount of the right of use asset, the difference shall be recognized as part of other liabilities
a)
True
b)
False
15.
Reassessment of lease liability is the result of amendments to the original lease contract.
a)
True
b)
False
16.
For lessors, the accounting concept that is principally used to classify leases into operating and finance is
a)
a. Substance over form
b)
b. Prudence
c)
c. Neutrality
d)
d. Completeness
17.
Ang Hirap Naman Company leases a machine with a fair value of P40,157 to Kabahan Ka Na Company for five years at an annual rental (in advance) of P10,000, and Kabahan Ka Na Company does not guarantee the estimated residual value of P9,000 on return of the asset.
What would be the interest rate implicit in the lease?
a)
a. 16%
b)
b. 17%
c)
c. 18%
d)
d. 19%
18.
Nakakaiyak Company leased an asset to Nakakatuwa Corporation.
Cost of the asset to Nakakaiyak P30,000
Lease term 7 years
The interest rate of 12 percent, and seven year-end rental payments. The lease qualifies as a capital lease and is classified as a direct-financing lease. The asset reverts to Nakakaiyak Company after the seventh year, when its residual value is estimated to be P3,000.
The amount of each rental payment is
a)
a. P6,276
b)
b. P6,573
c)
c. P6,000
d)
d. P3,573
19.
On January 1, 2023, Laban Lang Company leased a van with a fair value of P70,000.
Lease term 8 years
Present value of the lease payments P48,000
The useful life of the van is 7 years. The company operates a policy of straight-line depreciation.
What is the depreciation charge on the van in 2023?
a)
a. P10,000
b)
b. P8,750
c)
c. P6,857
d)
d. P6,000
20.
A lessor's gross investment in a finance lease is computed as
a)
a. Lease payments plus unguaranteed residual value
b)
b. Present value of (a)
c)
c. Difference between (a) and (b)
d)
d. Fair value plus transaction costs
21.
Walang Susuko Company is a dealer in machinery. On January 1, 2023, a machinery was leased to another company with the following provisions:
Annual rental payable (end) P4,000,000
Lease term and useful life of machinery 7 years
Cost of machinery 9,000,000
Residual value 2,000,000
Implicit interest rate 12%
PV of an OA of 1 for 7 periods @ 12% 4.56
PV of 1 for 7 periods at 12% 0.45
Initial direct cost by Walang Susuko Co. P200,000
At the end of the lease term, the machine will be returned to Walang Susuko Company.
How much is the gross investment?
a)
a. P30,000,000
b)
b. P28,000,000
c)
c. P28,200,000
d)
d. P30,200,000
22.
On January 10, 2023, Magiging CPA Ka Company (lessor) enters into a lease of equipment with Tiwala Lang Company. Information on the lease is as follows:
The cost of equipment is amounting to P205,862. Implicit interest rate is 13% with 6 years lease term. The indirect cost is P20,000.
How much is the annual rental payable at the beginning of each year?
a)
a. P100,000
b)
b. P50,000
c)
c. P60,000
d)
d. P30,000
23.
On January 10, 2023, ABC Company entered into a five-year non-cancellable lease.
The lease provides that the annual year-end payments is P100,000. The implicit rate is 12%, whereas the incremental borrowing rate is 9%. At the end of the lease, the lessor retains ownership of the property.
The initial amount to be recognized by ABC on January 10, 2023 is
a)
a. P360,478
b)
b. P500,000
c)
c. P388,965
d)
d. P358,654
24.
On January 05, 2023, ABC Company entered into a five-year lease.
The lease provides that the annual year-end payments is P100,000. The implicit rate is 14%. The cost of equipment is P343,308.
The unearned interest income to be recognized by ABC Company over the lease term is
a)
a. P155,400
b)
b. P154,600
c)
c. P156,692
d)
d. P145,657
100 %
