Day 25

Question 1

What types of leases are available to the Lessor?

Answer 1

1. Operating Lease - Some risks and rewards
2. Finance Lease
   A. Sales-Type Lease - All risks and rewards
   B. Direct Financing Lease - Most risks and rewards

MCQ-08768

Question 2

What is the financing liability?

Answer 2

The difference between the Sale Price and the Fair Value is recorded as a Financing Liability.

MCQ-08769

Question 3

What are the US GAAP rules to consider a lease a FINANCE LEASE?

Answer 3

1. The lease transfers ownership to the lessee
2. The lease contains a written purchase option
3. the PV at the beg. of the lease term of the “Min. lease pmts” equals or exceeds the FV of the leased property (90% of FV is the min.)
4. The lease term is a major part (75% or more) of the estimated economic life of the leased property
5. The asset is specialized such that there is no alternative use to the lessor

MCQ-00434

Question 4

Lessee and Lessor Finance (capitalize) Lease

OWNES

Answer 4

Ownership
Written option to purchase
Net Present Value - 90%
Economic Life - 75%
Specialized - no alternative use

If none of the above criteria are met

Operating (capitalize) Lease

Present Value
Collection

MCQ-01851