1.
A lease that transfers the benefits and risks of ownership should be capitalized.
A. True
B. False


2.
Minimum lease payments do not include the guaranteed residual value.
A. True
B. False


3.
Financial statement or note disclosure is required for all operating leases that have a noncancelable term in excess of one year.
A. True
B. False


4.
A lease that is cancelable cannot be recorded as a capital lease.
A. True
B. False


5.
A lease where the present value of the minimum lease payments exceeds 80% of the fair value of the asset must be capitalized.
A. True
B. False


6.
Executory costs represent payment on or reduction of the lease obligation.
A. True
B. False


7.
The present value of the unguaranteed residual value is included in the calculation of the minimum lease payments for the lessee.
A. True
B. False


8.
For a capital lease with a bargain purchase option, the lessee should depreciate the capitalized asset based on the lease term as opposed to the economic life of the asset.
A. True
B. False


9.
Under the operating lease method, the lessee will depreciate the asset over the lease term if less than the economic life of the asset.
A. True
B. False


10.
International Standard No. 17 (Accounting for Leases) is more detailed and prescriptive than the corresponding U.S. GAAP on leases.
A. True
B. False


11.
Which of the following are not includable in executory costs?
A.
Minimum rental payments.
B.
Taxes.
C.
Insurance.
D.
Maintenance.


12.
Which of the following is not a criterion for a lease to be recorded as a capital lease?
A.
There is transfer of ownership.
B.
There is a bargain purchase option.
C.
The lease is cancelable.
D.
The lease term is at least 75% of the asset's useful life.


13.
Which of the following is included in the minimum lease payment?
A.
Maintenance costs.
B.
Insurance.
C.
Property taxes.
D.
Bargain purchase option.


14.
All of the following are advantages of leasing except:
A.
leasing may permit more rapid changes in equipment.
B.
interest rates for leasing always lower.
C.
leasing permits the write-off of the full cost of the assets
D.
leasing may have favorable tax advantages.


15.
The lessee may not capitalize property for more than its:
A.
fair value.
B.
book value.
C.
historical cost.
D.
liquidation value.


16.
Which of the following is not a benefit to the lessor?
A.
High residual value.
B.
Interest revenue.
C.
Tax incentives.
D.
Off-balance sheet financing.


17.
Which of the following is not one of the classifications for leases from the lessor's viewpoint?
A.
Operating.
B.
Off-balance sheet.
C.
Direct financing.
D.
Sales-type.


18.
The distinction for the lessor between a direct financing lease or a sales-type lease is the presence or absence of:
A.
executory costs.
B.
minimum lease payments.
C.
manufacturer or dealer's profit.
D.
guaranteed residual value.


19.
Any lease that does not qualify as a direct financing lease or a sales-type lease is classified and accounted for by the lessor as a(n):
A.
capital lease.
B.
residual lease.
C.
temporary lease.
D.
operating lease.


20.
When a depreciable asset is leased under an operating lease, the lessor:
A.
records depreciation in the normal manner.
B.
defers depreciation until the lease expires.
C.
must use activity-based depreciation.
D.
never recognizes depreciation.



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