(a) Provide two reasons for a company to lease some type of capital equipment, rather than buying it. (b) Provide three reasons for a company to buy some capital equipment, rather than lease it.
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(a) Provide two reasons for a company to lease some type of capital equipment, rather than buying it.
(b) Provide three reasons for a company to buy some capital equipment, rather than lease it.
A lease is a contractual agreement between two parties, where the owner of an asset (lessor) grants the right to use the asset to another party (lessee) for a specified period of time, in exchange for periodic payments.
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- What is the meaning of the following:- IAS 40 paragraph 32A, An entity may: (a) choose either the fair value model or the cost model for all investment property backing liabilities that pay a return linked directly to the fair value of, or returns from, specified assets including that investment property; and (b) choose either the fair value model or the cost model for all other investment property, regardless of the choice made in (a).According to PAS 23, borrowing costs are capitalized when * A. They relate directly to the acquisition, construction, or production of a qualifying asset. B. The entity chooses to capitalize them C. They are material and are expected to be incurred over more than one reporting period. D. All of the options1. a. 3. Fair value b. 1. I only C. 1. Which is correct concerning capitalization of borrowing cost? If the borrowing is directly attributable to a qualifying asset, the borrowing cost is required to be capitalized as cost of the asset. If the borrowing is not attributable to a qualifying asset, the borrowing cost is required to be expensed as incurred. ll only Both I and II d. Neither I and II 2. An investor shall discontinue the use of the equity method from the date? The investor ceases to have significant influence over an associate. The associate operates under severe long-term restrictions that significantly impair its ability to transfer funds to the investor. The price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. The present value or discounted value of future net cash flows expected to be derived from an asset.
- 8. If a FVTPL financial asset is bought, the investment account is Multiple-Choice O A. Debited for the cost of the financial asset NOT including any extra expenditures required in making t he purchase O B. Debited for the cost of the financial asset including any extra expenditures required in making the pu rchase O C. Credited for the cost of the financial asset including any extra expenditures required in making the p urchase D. Credited for the cost of the financial asset NOT including any extra expenditures required in making the purchaseReasons a company may choose to lease an asset include all of the following, except for short-term need for the asset.O high risk of obsolescence.O lack of cash.O preferential tax treatment of leased assets.8.The cost of leasehold improvements should be expensed immediately, as this is not a capital asset. True False 9. The cost of assets purchased together in a lump sum should be allocated using the market value of each of the assets. True False 10. When a company spends money on a PPE, it must decide whether to record an asset or an expasset True False
- Which of the following is NOT true about capitalizing interest under U.S. GAAP? (A 24) Group of answer choices U.S. GAAP requires companies have a construction loan in order to capitalize interest. U.S. GAAP requires capitalization stop when the asset is substantially ready to use. U.S. GAAP requires construction to begin before interest can be capitalized. U.S. GAAP requires payments on construction to be made before interest can be capitalized.(12) The purchase of new capital equipment is an example of __________________________.LO1 The purpose of depreciation is to record the assets market value in the accounting records.
- 94 2. According to the revised Conceptual Framework, the asset is a right, while the liability is the obligation, rather than ultimate inflows or outflows of economic benefits resultin from the asset or liability. 3. Legal enforceability of a right, for example ownership necessary for control over an economic resource to exist 4. According to the revised Conceptual Framework, an asset exist even if the probability that it will provide inflows future economic benefits is low, and even if the asset is subie to a high measurement uncertainty. 5. According to the revised Conceptual Framework, what the entin controls is the right, and not the ultimate inflows of futu economic benefits that the economic resource may produce. 6. The Conceptual Framework defines income and expenses in terms of changes in assets and liabilities. 7. Not all items that meet the definition of a financial statement element are recognized; they are recognized only if recognizing them will also result in relevant and…How can an Investment be considered a liability since the company is forced to put resources into the project?A company is most likely to:A. use a fair value model for some investment property and a cost model for other investment property.B. change from the fair value model when transactions on comparable properties becomeless frequent.C. change from the fair value model when the company transfers investment property toproperty, plant, and equipment.
