Question Details

A lease where the intent is temporary use of the property


	1.	A lease where the intent is temporary use of the property by the lessee with continued ownership of the property by the lessor is called
		a.	off-balance sheet financing.
		b.	an operating lease.
		c.	a finance lease.
		d.	a purchase of property.



	2.	Which of the following is not a condition which would require the recording of a lease contract as a finance lease?
		a.	The lease transfers ownership of the property to the lessee.
		b.	The lease contains a bargain purchase option.
		c.	The lease term is a minor portion of the economic life of the leased property.
	d.	The present value of the lease payments represents substantially all of the fair value of the leased property.



	3.	In a lease contract,
		a.	the owner of the property is called the lessee.
		b.	the presence of a bargain purchase option indicates that it is a finance lease.
		c.	the renter of the property is called the lessor.
		d.	there is always a transfer of ownership at the end of the lease term.



	4.	Which of the following statements concerning leases is true?
		a.	Finance leases are favored by lessees.
	b.	The appearance of the account, Leased Asset, on the statement of financial position, signifies an operating lease.
	c.	The portion of a lease liability expected to be paid in the next year is reported as a current liability.
		d.	Present value is irrelevant in accounting for leases.


	5.	If the present value of lease payments represents substantially all of the fair value of the leased property, the
		a.	conditions are met for the lease to be considered a finance lease.
		b.	lease is uneconomical and should not be entered into.
		c.	lease may be classified as an operating lease.
	d.	recording of a lease liability is optional—that is, the off-balance-sheet approach can be elected.







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