ACC305 Final Exam: Leasing, Accounting Policies, and Financial Reporting

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ACC305 Final Exam: Leasing, Accounting Policies, and Financial ReportingStrayer acc305 Final Exam Part 1Question 1Which of the following statements is true when comparing the accounting for leasingtransactions under U.S. GAAP with IFRS?The IFRS leasing standard is the subject of over 30 interpretations since its issuance in 1982.IFRS for leases is more "rules-based" than U.S. GAAP and includes many bright-line criteria todetermine ownership.IFRS does not provide detailed guidance for leases of natural resources,sale-leasebacks, andleveraged leases.IFRS requires that companies provide a year-by-year breakout of future noncancelable leasepayments due in years 1 through 5.Question 2A lessor with a sales-type lease involving an unguaranteed residual value available to the lessorat the end of the lease term will report sales revenue in the period of inception of the lease atwhich of the following amounts?The minimum lease payments plus the unguaranteed residual value.The present value of the minimum lease payments.The cost of the asset to the lessor, less the present value of any unguaranteed residual value.The present value of the minimum lease payments plus the present value of the unguaranteedresidual value.Question 3Which of the following is an advantage of leasing?Off-balance-sheet financingLess costly financing100% financing at fixed ratesAll of theseQuestion 4Which of the following is a correct statement of one of the capitalization criteria?The minimum lease payments (excluding executory costs) equal or exceed 90% of the fair valueof the leased property.The lease transfers ownership of the property to the lessor.The lease contains a purchase option.The lease term is equal to or more than 75% of the estimated economic life of the leasedproperty.Question 5Hull Co. leased equipment to Riggs Company on May 1, 2013. At that time the collectibility ofthe minimum lease payments was not reasonably predictable. The lease expires on May 1, 2014.Riggs could have bought the equipment from Hull for $4,000,000 instead of leasing it. Hull'saccounting records showed a book value for the equipment on May 1, 2010, of $3,500,000.Hull's depreciation on the equipment in 2013 was $450,000. During 2013, Riggs paid $900,000in rentals to Hull for the 8-month period. Hull incurred maintenance and other related costs underthe terms of the lease of $80,000 in 2013. After the lease with Riggs expires, Hull will lease theequipment to another company for two years.

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