In computing the present value of the minimum lease payments, the lessee should
a. use its incremental borrowing rate in all cases.
b. use either its incremental borrowing rate or the implicit rate of the lessor, whichever is higher, assuming that the implicit rate is known to the lessee.
c. use either its incremental borrowing rate or the implicit rate of the lessor, whichever is lower, assuming that the implicit rate is known to the lessee.
d. none of these.
Answer: C
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Accounting Chapter 21
- When a company sells property and then leases it back, any gain on the sale should usually be
- In a sale-leaseback transaction where none of the four leasing criteria are satisfied, which of the following is false?
- To avoid leased asset capitalization, companies can devise lease agreements that fail to satisfy any of the four leasing criteria. Which of the following is not one of the ways to accomplish this goal?
- The Lease Liability account should be disclosed as
- Which of the following statements is correct?
- For a sales-type lease,
- A lessor with a sales-type lease involving an unguaranteed residual value available to the lessor at the end of the lease term will report sales revenue in the period of inception of the lease at which of the following amounts?
- The primary difference between a direct-financing lease and a sales-type lease is the
- The initial direct costs of leasing
- When lessor's account for residual values related to leased assets, they
- If the residual value of a leased asset is guaranteed by a third party
- In order to properly record a direct-financing lease, the lessor needs to know how to calculate the lease receivable. The lease receivable in a direct-financing lease is best defined as
- In a lease that is appropriately recorded as a direct-financing lease by the lessor, unearned income
- Which of the following would not be included in the Lease Receivable account?
- A lessee with a capital lease containing a bargain purchase option should depreciate the leased asset over the
- In the earlier years of a lease, from the lessee's perspective, the use of the
- In computing depreciation of a leased asset, the lessee should subtract
- Executory costs include
- Minimum lease payments may include a
- Which of the following is a correct statement of one of the capitalization criteria?
- The methods of accounting for a lease by the lessee are
- The amount to be recorded as the cost of an asset under capital lease is equal to the
- What impact does a bargain purchase option have on the present value of the minimum lease payments computed by the lessee?
- An essential element of a lease conveyance is that the