Question

choose the correct answer: which of the following arrangements would most likely be accounted for as...

choose the correct answer:
which of the following arrangements would most likely be accounted for as an operating lease by the lessee
A- the lease agreement runs for 16 years and the economic life of the leased property is 20 years
B- the present value of the minimum lease payments is $57,000 and the fair value of the leased property is $60,000.
C- the lease agreement allows the lessee the right to purchase the leased asset for $1.00 when half of the asset's economic useful life has expired.
D- the lessee may renew the two- years lease for an additional two years at the same rental

Homework Answers

Answer #1
Answer is
D- the lessee may renew the two- years lease for an additional two years at the same rental
If the lease term covers more than 75% of the useful life of asset,it is a financial lease
Hence,Option A is wrong
If the present value of minimum lease payment covers more than 90% of the fair value of the leased property, it is a financial lease
Hence,Option B is wrong
If the lease agreement allows the lessee the right to purchase leased asset,it is a financial lease
Hence,Option C is wrong
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
The FASB defines financial lease as leases that meet which of the following conditions: HINT: There...
The FASB defines financial lease as leases that meet which of the following conditions: HINT: There is more than one correct answer listed - select all you believe to be correct. Group of answer choices The lease agreement transfers ownership to the lessee before the lease expires The lessee can purchase the asset for a bargain price when the lease expires The lease lasts for at least 75% of the asset's estimated economic lifeThe present value of the lease payments...
Which of the following is not true for a finance lease? A The lease agreement has...
Which of the following is not true for a finance lease? A The lease agreement has a primary period which covers all or most of the useful economic life of the asset. B The lessee is normally responsible for servicing and maintenance of the asset. C The lease payments will appear in the profit and loss account as an expense. D The lessee records the leased asset as a fixed asset in its balance sheet.
Answer the following questions with "Yes or No" A: Transfer of Ownership Test: There is NO...
Answer the following questions with "Yes or No" A: Transfer of Ownership Test: There is NO provision in HYPER to transfer ownership of the leased asset to the lessee. The lessor and the lessee expect that the lease asset will be returned to the lessor at the end of the lease term. Has the “transfer of ownership test” been passed? B: Purchase Options Test: HYPER grants NO “bargain purchase option” to the lessee. If the lessee at any point wants...
Blossom Leasing Company agrees to lease equipment to Blue Corporation on January 1, 2020. The following...
Blossom Leasing Company agrees to lease equipment to Blue Corporation on January 1, 2020. The following information relates to the lease agreement. 1. The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years. 2. The cost of the machinery is $520,000, and the fair value of the asset on January 1, 2020, is $737,000. 3. At the end of the lease term, the asset reverts to the...
On January 1 of year 1, Falk Company signed a contract to lease space in a...
On January 1 of year 1, Falk Company signed a contract to lease space in a building for 3 years. The lease contract calls for annual (prepaid) rental payments of $100,000 on each January 1 throughout the life of the lease and for the lessee to pay for all additions and improvements to the leased property. Present value of the three lease payments is $270,000. Assume the lease is accounted for as an operating lease. Prepare entries for Falk to...
The following facts are for a non-cancellable lease agreement between Blossom Corporation and Russell Corporation, a...
The following facts are for a non-cancellable lease agreement between Blossom Corporation and Russell Corporation, a lessee: Inception date July 1, 2020 Annual lease payment due at the beginning of each year, starting July 1, 2020 $ 20,194.64 Bargain purchase option price at end of lease term reasonably certain to be exercised by Russell $ 3,700.00 Lease term 5 years Economic life of leased equipment 10 years Lessor’s cost $ 48,800.00 Fair value of asset at July 1, 2020 $...
Laura Leasing Company signs an agreement on January 1, 2020, to lease equipment to Sunland Company....
Laura Leasing Company signs an agreement on January 1, 2020, to lease equipment to Sunland Company. The following information relates to this agreement. 1. The term of the non-cancelable lease is 3 years with no renewal option. The equipment has an estimated economic life of 5 years. 2. The fair value of the asset at January 1, 2020, is $71,000. 3. The asset will revert to the lessor at the end of the lease term, at which time the asset...
Which of the following items would require a lessor to classify a lease as an operating...
Which of the following items would require a lessor to classify a lease as an operating lease? A) The lease contains a bargain purchase option. B) Ownership of the property is transferred to the lessee during the lease term. C) The lease term is 80% of the estimated economic life of the leased property. D) The collectability of the minimum lease payments is highly uncertain. Triple Tango Track leases exercise equipment to its customers under direct-financing leases. Typically the equipment...
Company A enters into a lease agreement as lessor on january 1, 2016. the term of...
Company A enters into a lease agreement as lessor on january 1, 2016. the term of the noncancelable lease is 10 years and payment are required at the end of each year. the following information relates to this agreement: 1. Lessee has the option to purchase the asset for $12000 when the lease expires at which time the fair value is expected to be $30000 2. The asset has a cost of $100,000, an estimated useful life of 15 years,...
Blue Corporation leased equipment to Larkspur, Inc. on January 1, 2017. The lease agreement called for...
Blue Corporation leased equipment to Larkspur, Inc. on January 1, 2017. The lease agreement called for annual rental payments of $1,141 at the beginning of each year of the 4-year lease. The equipment has an economic useful life of 8 years, a fair value of $9,400, a book value of $7,400, and Blue expects a residual value of $6,900 at the end of the lease term. Blue set the lease payments with the intent of earning a 7% return, though...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT