CFAMontreal
New member
- Jul 30, 2006
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Here we go, 4 questions 
I answered only two of them correctly. Let's see how you will fare
1. If a lease is classified as a direct financing lease, the lessor reports
a. a gain or loss on sale of the asset to the lessee
b. a receivable in the balance sheet measured at the present value of the cash flows under the lease agreement discounted at the lessor's implicit rate of interest
c. the historical cost of the leased asset less accumulated depreciation as property, plant, and equipment in the balance sheet
d. the receipt of lease payments as an financing activity in the statement of cash flows
2. When leasing is a secondary activity of the lessor, receipt of the lease payments for a non-operating lease are reported
a. in the income statement as rental revenue
b. in the statement of cash flows as an operating activity
c. in the statement of cash flows divided between interest which is reported as an operating activity and reduction of the receivable which is reported as an investing activity
d. as other income in the income statement
3. When the lessor reports a direct financing lease, interest revenue over the life of the lease will
a. increase each year
b. decrease each year
c. be the same each year
d. equal the amount of the lease payment each year
4. A lessor has a direct financing lease. Under the lease agreement, there will be 10 lease payments of $2,000 each that will be received at the end of each year during the lease term. Unearned income is equal to $945. Title will transfer to the lessee at the end of the lease term. How should the lessor report the lease agreement in the balance sheet at its inception?
a. The gross receivable of $20,000 would be reported as an asset.
b. The gross receivable of $20,000 would be reported as an asset, and the unearned income would be reported as a liability.
c. The present value of the gross receivable discounted at the implicit interest rate would be reported as an asset, and the unearned income would be reported as a liability.
d. The gross receivable of $20,000 minus unearned income of $945 would be reported as an asset
I answered only two of them correctly. Let's see how you will fare 1. If a lease is classified as a direct financing lease, the lessor reports
a. a gain or loss on sale of the asset to the lessee
b. a receivable in the balance sheet measured at the present value of the cash flows under the lease agreement discounted at the lessor's implicit rate of interest
c. the historical cost of the leased asset less accumulated depreciation as property, plant, and equipment in the balance sheet
d. the receipt of lease payments as an financing activity in the statement of cash flows
2. When leasing is a secondary activity of the lessor, receipt of the lease payments for a non-operating lease are reported
a. in the income statement as rental revenue
b. in the statement of cash flows as an operating activity
c. in the statement of cash flows divided between interest which is reported as an operating activity and reduction of the receivable which is reported as an investing activity
d. as other income in the income statement
3. When the lessor reports a direct financing lease, interest revenue over the life of the lease will
a. increase each year
b. decrease each year
c. be the same each year
d. equal the amount of the lease payment each year
4. A lessor has a direct financing lease. Under the lease agreement, there will be 10 lease payments of $2,000 each that will be received at the end of each year during the lease term. Unearned income is equal to $945. Title will transfer to the lessee at the end of the lease term. How should the lessor report the lease agreement in the balance sheet at its inception?
a. The gross receivable of $20,000 would be reported as an asset.
b. The gross receivable of $20,000 would be reported as an asset, and the unearned income would be reported as a liability.
c. The present value of the gross receivable discounted at the implicit interest rate would be reported as an asset, and the unearned income would be reported as a liability.
d. The gross receivable of $20,000 minus unearned income of $945 would be reported as an asset