Financial Assets: Cash And Receivables

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The Framework for Financial Reporting
Accounting Judgements
Statements of Income and Comprehensive Income
Statements of Financial Position and Changes in Equity; Disclosure Notes
The Statement of Cash Flows
Revenue Recognition
Financial Assets: Cash and Receivables
Cost-Based Inventories and Cost of Sales
Long-Lived Assets
Depreciation, Amortization, and Impairment
Financial Instruments: Investments in Bonds and Equity Securities

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Question 1

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True/False

The principal attribute of finance leases is that the risks and rewards of asset ownership are deemed to remain with the lessor.

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Question 2

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True/False

All long-term leases should be capitalized in the accounts by the lessee.

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Question 3

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Operating leases are usually of shorter duration than finance leases and under this type of lease,the risks and rewards of asset ownership remain with the lessor.

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Question 4

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The use of contingent lease payments is one method companies use to avoid lease capitalization.

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Question 5

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A lessee is usually motivated to report a lease liability as a finance lease because the lessee can capitalize the "cost" of the leased asset.

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Question 6

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Companies that opt for finance leases usually do so because of the tax advantages finance leases provide.

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Question 7

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The lessee's incremental borrowing rate is the rate that,at the inception of the lease,the lessee would have incurred to borrow over a similar term the funds necessary to purchase the leased asset.

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Question 8

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The lessee should use the lessor's borrowing rate (if known)to account for a finance lease,even if this provides a present value of lease payments that is higher than the fair value of the asset at the inception of the lease.

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Question 9

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Both guaranteed and unguaranteed residual values should be included in the calculation of the lessee's minimum lease payments of the lessee.

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Question 10

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The same quantitative thresholds for determining the existence of finance leases apply under both IFRS and ASPE.

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Question 11

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Geisler Company leased a building from Ryan Company for 5 years.The first year of the lease was forgiven with payments beginning in the second year.No journal entry is required until the second year.

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Question 12

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The term of a finance lease includes the initial lease term and any bargain renewal terms.

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Question 13

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To qualify as a lessor for tax purposes,a company must derive at least 90% of its revenues from leasing.

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Question 14

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If a lease transfers the residual value of the leased asset to the lessee at the end of the lease term,the lessee has permanent ownership of the leased asset.

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Question 15

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If the straight-line method is used by the lessee to amortize the non-refundable down payment in an operating lease,a constant dollar amount of the prepayment is allocated as expense to each period covered by the lease.

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Question 16

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The lessor's internal rate of return is normally the rate implicit in the lease.

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Question 17

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A lessee's insurance expense throughout the term of a finance lease is usually an estimate as opposed to an actual expense amount.

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Question 18

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The effective interest method is normally used to compute the lessor's finance expense related to a finance lease.

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Question 19

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For an operating lease,the amount initially capitalized by the lessee is the present value of the lease rents to be paid over the lease term.

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Question 20

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Any operating or executory costs should be excluded from the calculation of the minimum lease payments.

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