Accounting For Leases

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An Overview of the International External Reporting Environment
The Conceptual Framework of Accounting and Its Relevance to Financial Reporting
Theories of Financial Accounting
An Overview of Accounting for Assets
Depreciation of Property, Plant and Equipment
Revaluations and Impairment Testing of Non-Current Assets
Inventory
Accounting for Intangibles
An Overview of Accounting for Liabilities
Accounting for Leases
Share Capital, Reserves and Share Options Employee Bonus Schemes
Accounting for Financial Instruments
Revenue Recognition Issues
The Statement of Comprehensive Income and Statement of Changes in Equity
Accounting for Income Taxes
The Statement of Cash Flows
Events Occurring After the Reporting Date
Related-Party Disclosures
Earnings Per Share
Further Consolidation Issues I: Accounting for Intragroup Transactions
Further Consolidation Issues II: Accounting for Non-Controlling Interests
Further Consolidation Issues III: Accounting for Indirect Ownership Interest
Accounting for Foreign Currency Transactions
Translating the Financial Statements of Foreign Operations
Accounting for Corporate Social Responsibility

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Question 1

Free

True/False

Contingent rent is included in the determination of minimum lease payments under IAS 17 Leases.

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True

False

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Question 2

Free

True/False

If the lease arrangement contains a bargain purchase option,it is reasonable to assume that the risks and rewards of ownership are transferred to the lessee.

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True

False

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Question 3

Free

True/False

A leased asset classified as a finance lease is not subject to depreciation or amortisation.

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True

False

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Question 4

Free

True/False

If there is reasonable assurance at the inception of the lease that the lessee will obtain ownership of the assets at the end of the lease term,then the leased asset should be depreciated over the lease term.

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True

False

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Question 5

Free

True/False

In a sale and leaseback transaction,if the risks and rewards incidental to ownership effectively pass to the lessor,this arrangement is classified as a finance lease.

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Question 6

True/False

A finance lease is one in which substantially all the risks and benefits of ownership pass to the lessee.

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True

False

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Question 7

True/False

If a lease transfers ownership of the property to the lessee,or contains a bargain purchase option,then this is consistent with the lease being an operating lease.

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True

False

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Question 8

True/False

A non-cancellable lease,which transfers the risks and rewards associated with asset ownership,can still be terminated early with the permission of the lessor.

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True

False

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Question 9

True/False

In the situation where there is an unguaranteed residual in a finance lease agreement,the leased asset will be recorded in the books of the lessee at an amount less than its fair value at the inception of the lease.

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True

False

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Question 10

True/False

An owner of an asset may sell it and then lease it back from the new owner.Where this lease meets the conditions to be classified as a finance lease,the profit or loss on the sale of the asset recorded by the lessee should be classified as a finance item in the statement of comprehensive income in the year of the sale.

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True

False

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Question 11

True/False

The initial direct costs of a sales-type lease,borne by the lessor,are to be accounted for by the lessor as part of the lease receivable.

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True

False

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Question 12

True/False

A guaranteed residual value is that part of the residual value that is guaranteed by the lessee,or by a party related to the lessee.

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True

False

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Question 13

True/False

Over the term of the lease,the rental payments to the lessor represent a payment of principal plus interest.

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True

False

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Question 14

True/False

Operating leases are capitalised for inclusion in the statement of financial position.

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True

False

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Question 15

Multiple Choice

In the case of a finance lease,the accounting treatment by the lessee could:

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calculate the IRR implicit in the lease contract and disclose it in the notes to the accounts.

provide note disclosure to the accounts and recognise the lease payments in the same way as a rental expense.

accrue the lease payments and match them against revenues earned by using a unit of production method.

recognise an asset and associated liability equal in value to the present value of the minimum lease payments.

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Question 16

Multiple Choice

In determining if the risk and rewards of ownership have been transferred,IAS 17 states the following would indicate a finance lease is in effect:

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Ownership of the assets transfers at the end of the lease term for a variable payment equal to its then fair value.

Contingent rents exist.

The lease is non-cancellable by the lessor.

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Question 17

Multiple Choice

IAS 17 defines the benefits of ownership to include:

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those obtainable from the insurance claims associated with it.

those obtainable from gains in the realisable value of the asset.

those obtainable from the profitable use of the asset.

those obtainable from gains in the realisable value of the asset and those obtainable from the profitable use of the asset.

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Question 18

Multiple Choice

The term 'bargain purchase option' is not used explicitly in IAS 17 but is described as:

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the option to purchase the leased asset for significantly less than its cost at the date the option becomes exercisable, for it to be reasonably certain at the inception of the lease, that the option will be exercised.

the option to purchase the asset at a price that is expected to be sufficiently lower that the fair value at the date the option becomes exercisable, for it to be reasonably certain at the inception of the lease, that the option will be exercised.

being in place when the lessee is guaranteed to undertake the option at the end of the lease.

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Question 19

Multiple Choice

Minimum lease payments include:

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any bargain purchase option amount.

any rentals paid to reimburse the lessor for executory costs.

contingent rentals.

unguaranteed residuals.

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Question 20

Multiple Choice

Kensington Ltd decides to lease some equipment from Piccadilly Ltd on the following terms: If the interest rate implicit in the lease is 8%,what is the fair value of the equipment at the inception of the lease (rounded to the nearest dollar)?

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$44 518

$46 094

$40 094

$48 399

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