Generally accepted accounting principles require that certain lease agreements be accounted for as purchases The theoretical basis for this treatment is that a lease of this type a effectively conveys all of the benefits and risks incident to the ownership of property b is an example of form over substance c provides the use of the leased asset to the lessee for a limited period of time d must be recorded in accordance with the concept of cause and effect Equal monthly rental payments for a particular lease should be charged to Rental Expense by the lessee for which of the following Capital Lease Operating Lease a Yes No b Yes Yes c No No d No Yes Wrench Repairs acquires equipment under a noncancelable lease at an annual rental of $45,000, payable in advance for five years After five years, there is a bargain purchase option of $75,000 The appropriate interest rate is 12 percent What is the total present value of the lease and the first year's interest expense a $224,234 and $26,908 b $224,234 and $21,508 c $204,771 and $21,508 d $204,771 and $19,173 On January 1, Landau Company signed a ten year noncancelable lease for a new machine, requiring $45,000 annual payments at the beginning of each year The machine has a useful life of 15 years, with no salvage value Title passes to Landau at the lease expiration date Landau uses straight line depreciation for all of its plant assets Aggregate lease payments have a present value on January 1 of $352,000, based on an appropriate rate of interest For the first year, Landau should record depreciation (amortization) expense for the leased machine at a $45,000 b $35,200 c $23,467 d $21,533 On January 1, 2014, Bullitt Corporation sold a machine to Sting Corporation and simultaneously leased it back for ten years The following information is available regarding the lease Estimated remaining useful life at December 31, 2013 10 years Sales price $ 90,000 Carrying value at December 31, 2013 $ 52,500 Annual rental under leaseback $ 14,600 Interest rate implicit in the lease 10 Present value of the lease rentals $ 89,711 ($14,600 for 10 years at 10 )

Question: Generally accepted accounting principles require that certain lease agreements be accounted for as purchases. The theoretical basis for this treatment is that a lease of

Generally accepted accounting principles require that certain lease agreements be accounted for as purchases. The theoretical basis for this treatment is that a lease of this type

a.	effectively conveys all of the benefits and risks incident to the ownership of property.
b.	is an example of form over substance.
c.	provides the use of the leased asset to the lessee for a limited period of time.
d.	must be recorded in accordance with the concept of cause and effect.

Equal monthly rental payments for a particular lease should be charged to Rental Expense by the lessee for which of the following?

Capital Lease Operating Lease

a.	Yes No
b.	Yes Yes
c.	No No
d.	No Yes

Wrench Repairs acquires equipment under a noncancelable lease at an annual rental of $45,000, payable in advance for five years. After five years, there is a bargain purchase option of $75,000. The appropriate interest rate is 12 percent. What is the total present value of the lease and the first year's interest expense?

a.	$224,234 and $26,908
b.	$224,234 and $21,508
c.	$204,771 and $21,508
d.	$204,771 and $19,173

On January 1, Landau Company signed a ten-year noncancelable lease for a new machine, requiring $45,000 annual payments at the beginning of each year. The machine has a useful life of 15 years, with no salvage value. Title passes to Landau at the lease expiration date. Landau uses straight-line depreciation for all of its plant assets. Aggregate lease payments have a present value on January 1 of $352,000, based on an appropriate rate of interest. For the first year, Landau should record depreciation (amortization) expense for the leased machine at

a.	$45,000
b.	$35,200
c.	$23,467
d.	$21,533

On January 1, 2014, Bullitt Corporation sold a machine to Sting Corporation and simultaneously leased it back for ten years. The following information is available regarding the lease:

	Estimated remaining useful life at December 31, 2013					10 years
	Sales price					$ 90,000
	Carrying value at December 31, 2013					$ 52,500
	Annual rental under leaseback					$ 14,600
	Interest rate implicit in the lease					10%
	Present value of the lease rentals					$ 89,711
	($14,600 for 10 years at 10%)

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

Comprehensive Answer to Chapter 15 Leases Multiple Choice Questions Below are the correct answers with explanations for the computational and conceptual multiplechoice problems provided from Chapter 1... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Accounting Questions!

On a reconciliation of net income to eash from operations, depreelation is added back to net income as depreciation a . is a direct outflow of eash. b . reduces net income but does not involve an...

i need a solution of computional problems i really need help on those. Chapter 15Leases MULTIPLE CHOICE 1. Generally accepted accounting principles require that certain lease agreements be accounted...

II. SELECT THE BEST ANSWER (60 points) 1. Generally accepted accounting principles require that certain lease agreements be accounted for its purchases. The theoretical basis for this treatment is...

11. SELECT THE BEST ANSWER (60 points) 1. Generally accepted accounting principles require that certain lease agreements be accounted for as purchases. The theoretical basis for this treatment is...

Generally accepted accounting principles require that certain lease agreements be accounted for as purchases. The theoretical basis for this treatment is that a lease of this type a. effectively...

Generally accepted accounting principles require that certain lease agreements be accounted for in similar fashion as purchased assets. The theoretical basis for this treatment is that a lease of...

Generally accepted accounting principles require that certain lease agreements be accounted for as purchases. The theoretical basis for this treatment is that a lease of this type a. effectively...

6 . When accounting for leases generally accepted accounting principles requires that some lease agreements be accounted for as purchases of assets. The theoretical justification for this treatment...

D. Analysis of Statement of Cash Flows (page 54) 1. What are the cash flows from Operating Activities for the last three years? Is the trend in these cash flows positive, negative or neutral? For...

Assume that you are an auditor and as part of your routine audit, you discover a fraud being committed by the accounts receivables manager. The fraud is large enough to have a material impact on the...

Assume that the economy of Stock land produces four goods, rocks, socks, blocks, and clocks. Rocks and blocks are both used as weapons; they are good substitutes for each other. The quantities and...

The daily profit from a juice vending machine placed in an office building is a value of a normal random variable with unknown mean and variance 2. Of course, the mean will vary somewhat from...

3000+ words A useful way to identify a potential scientific research project in business and management is to look for a pain point" - a thorny problem plaguing a set of people in an organisation and...

12. What is meant by the statement, often we do not know what the real problem is until we look at its possible consequences or solutions?.

9. What is meant by the statements: a) Experiences are different from what is experienced. b) The description is different from what is described.

11. What is meant by the statement, as observers of social reality, we are always part of this reality?.