Scribd
Upload
11 views

Lease Accounting

Lease Accounting questions

Uploaded by

James Town
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
11 views

Lease Accounting

Lease Accounting questions

Uploaded by

James Town
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 6

SHORT-TERM AND/OR LOW VALUE LEASE

1.As an inducement to enter a lease, Lessor Inc. grants Lessee Inc. nine months of free rent under
a five-year operating lease. The lease is effective on July 1, 2015, and provides for monthly rentals
of P1,000 to begin on April 1, 2016. In Lessor’s income statement for the year ended June 30,
2016, rent income should be reported as?
a) 3,000
b) 6,200
c) 9,000
d) 10,200
2.Franco, a lessor, leased an equipment under an operating lease. The lease term is 5 years and
the lease payments are made in advance on January 1 of each year as follows:
January 1, 20x4 1,000,000
January 1, 20x5 1,000,000
January 1, 20x6 1,400,000
January 1, 20x7 1,700,000
January 1, 20x8 1,900,000

3. On December 31, 20x5, what amount should be reported as rent receivable?


a) 0 (Unearned Rent)
b) 500,000
c) 800,000
d) 1,500,000
LEASEE ACCOUNTING – FINANCE LEASE
MALAYAN leased a machinery on January 1, 2021. In addition:
Annual rental payable at the end of the year 1,000,000

Residual value guarantee 500,000

Payment to lessor to obtain a long-term lease 300,000

Cost of dismantling and restoring the asset


as required by contract at present value 390,000

Annual executory cost paid by lessee 50,000

Lease term 4 years

Useful life of machinery 8 years

Implicit interest rate 10%

Present value of an ordinary annuity of 1 at


10% for 4 periods 3.17

Present value of 1 at 10% for 4 periods 0.68

4.What is the initial lease liability?


a) 3,000,000
b) 3,510,000
c) 4,300,000
d) 5,100,000

5.What is the cost of right of use asset?


a) 4,000,000
b) 4,200,000
c) 4,300,000
d) 4,500,000

6.What is the depreciation for the current year?


a) 800,000
b) 925,000
c) 965,000
d) 1,050,000

LESSOR ACCOUNTING
Odette leased a computer to Thamuz under a direct financing lease on January 1, 2021.
The computer has no residual value at the end of the lease and the lease does not contain bargain
purchase option.
The entity wishes to earn 8% interest on a 5-year lease of equipment with a cost of P3,234,000.
The present value of an annuity due of 1 at 8% for 5 years in 4.312.
7.What is the total revenue that Odette will earn over the lease term?
a) 431,000
b) 436,000
c) 516,000
d) 604,000
8.What amount should be reported as interest revenue for the 2021?
a) 100,400
b) 198,720
c) 204,720
d) 239,400

Global Inc. leased equipment to a lessee on December 31, 2009 for a duration of 10 years. The
lessee contracted to pay P400,000 annual rent on December 31, 2009, and on December 31 of
each of the next nine years. The lease liability was recorded at P2,700,000 on December 31,
2009, before the first payment.

The equipment’s useful life is 12 years, and the interest rate implicit in the lease is 10%, The entity
used the straight line method to depreciate all equipment.
9.In recording the December 31, 2010 payment, what amount should be used to reduce the lease
liability?
a) 100,000
b) 170,000
c) 260,000
d) 300,000

10.What is the interest expense for the year 2010?


a) 220,000
b) 230,000
c) 270,000
d) 300,000
Gusion Inc. Leased Equipment to Windtaker Inc on January 1, 2021. Additional relevant
information is as follows:
Cost of equipment P1,200,000
Useful life of equipment 5 years
Lease term 4 years
Annual rent payable at the start of each year 400,000
Interest rate implicit in the lease 10%

Initial direct costs amount to P80,000. And this qualifies for sales-type lease.

11.How much is the gross investment in the lease on January 1, 2021?


a) 1,900,000
b) 2,200,000
c) 1,600,000
d) 1,700,000
12.How much is the net investment in the lease on January 1, 2021?
a) 1,394,740
b) 1,382,860
c) 1,286,000
d) 1,180,000
13.How much is the gross profit from the sale?
a) 111,740
b) 194,740
c) 213,540
d) 243,940
14.How much is the net profit from the sale?
a) 114,740
b) 125,840
c) 134,740
d) 115,640
15.What is the total interest income to be recognized by Gusion over the lease term?
a) 203,400
b) 258,300
c) 405,260
d) 525,259
SALE AND LEASEBACK
(Valix IA 2 2021 Page 479) Lion Corporation sold a building with a remaining life of 20 years and
immediately leased it back for 5 years:
Sale price at above fair value 20,000,000
Fair value of building 18,000,000
Carrying amount of building 10,800,000
Annual rental payable at the end of each year 1,500,000
Implicit interest rate 12%
PV of ordinary annuity of 1 at 12% for five periods 3.60

16.What is the initial lease liability? – Seller - Lessee


a) 3,500,000
b) 5,400,000
c) 6,500,000
d) 7,400,000
17.What is the Cost of right of use asset?
a) 2,000,000
b) 2,040,000
c) 3,000,000
d) 2,500,000
18.What is the gross rental income of the buyer-lessor?
a) 555,555
b) 944,444
c) 1,700,000
d) 1,000,000
19.What amount would be reported as gain on right transferred to the buyer-lessor?
a) 4,400,000
b) 5,660,000
c) 5,840,000
d) 6,300,000
20.What is the depreciation of the building of the buyer lessor? Depreciation of Seller – Lessee?
a) 1,000,000
b) 1,200,000
c) 900,000
d) 800,000

On January 1, 2020, Swift Corp. sold a building with remaining useful life of 30 years and
immediately leased it back for 5 years.
Sale price at above fair value 18,000,000
Fair value of building 20,000,000
Carrying amount of building 24,000,000
Annual rental payable at the end of each year 1,000,000
Implicit interest rate 12%
PV of ordinary annuity of 1 at 12% for five periods 3.60

21.What amount should be reported as initial lease liability?


a) 3,000,000
b) 3,600,000
c) 4,800,000
d) 3,400,000
22.What is the cost of the right of use asset?
a) 4,880,000
b) 5,960,000
c) 6,720,000
d) 6,380,000
23.What is the net annual rent income of the buyer-lessor?
a) 200,000
b) 300,000
c) 400,000
d) 500,000
24.What amount should be reported as loss on right transferred?
a) 2,340,000
b) 2,880,000
c) 3,500,000
d) 3,470,200

You might also like