QUIZ 3: LEASES (LESSOR)
PART I. TRUE OR FALSE: Identify if the statements are true or false. Choose the
letter that represents the correct combination of answers.
a. Both statements are true.
b. Only statement I is true.
1.
2.
c. Only statement II is true.
d. Both statements are false.
Statement 1: Executory costs are charged to expense when they are incurred.
TRUE
Statement 2: Annual payment shall be applied to interest first before the net
investment. TRUE
Statement 1: A lease bonus granted by the lessee should be recognized as a
deduction from rent revenue. FALSE
Statement 2: Finance lease receivable shall recorded at net of investment. FALSE
3.
Statement 1: Any security deposit refundable upon the lease expiration shall
be accounted for as liability by the lessor. TRUE
Statement 2: Discount on finance lease receivable is a liability account. FALSE
4.
Statement 1: Finance lease receivable is an Asset account. TRUE
Statement 2: A lease bonus granted by the lessor is recognized as unearned
rent income to be amortized over the lease term. FALSE
5.
Statement 1: The adjusted net investment in lease would be divided to the
periodic payment to derive the present value factor to be used to
approximate the implicit interest rate in the lease. TRUE
Statement 2: A lease contract is considered an OPERATING LEASE when there is
no substantial transfer of risk and rewards incidental to the ownership
of asset. TRUE
6.
Statement 1: The NET INVESTMENT INTHE LEASE is the gross investment in
the lease discounted at the interest rate implicit in the lease.
TRUE
Statement 2: Gross investment = gross rentals for the entire lease term plus
the guaranteed residual value. FALSE
7.
Statement 1: Under direct finance leases, lessor maintains the record for the
leased and records depreciation base in its normal depreciation
policy for similar assets. FALSE
Statement 2: Unguaranteed residual value is the portion of the residual value
of the underlying asset, the realization of which is neither assured
nor guaranteed by a party related to the lessor. TRUE
8.
Statement 1: If the lessee can cancel the lease, the lessor’s losses associated
with the cancellation are borne by the lessee, then it shall be
classified as finance lease. TRUE
Statement 2: Initial direct costs other than those incurred by a manufacturer or dealer
is included in the initial measurement of the net investment in the lease
and reduce the amount of income recognized over the lease term.
TRUE
9.
Statement 1: Gains or losses from the fluctuation in the fair value of the
residual accrue to the lesso is other criteria to classify lease as
finance lease. FALSE
Statement 2: Net investment = cost of the asset plus any initial direct cost.
TRUE
10. Statement 1: Discount on finance lease shall be recorded at gross investment.
FALSE
Statement 2: A lease contract is considered as a FINANCE LEASE if it
transfers substantially all the risks and rewards incidental to the
ownership of the asset to the lessee. TRUE