initial direct costs incurred in relation to a lease transaction is added to A)the cost of sales of lessee under a sales-type lease B)get the net investment for the lessor under a direct finance lease C)get the net investment for the lessor under a sales-type lease D)get the right of use asset for the lessor

initial direct costs incurred in relation to a lease transaction is added to A)the cost of sales of lessee under a sales-type lease B)get the net investment for the lessor under a direct finance lease C)get the net investment for the lessor under a sales-type lease D)get the right of use asset for the lessor

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

Chapter11: Notes, Bonds, And Leases

Section: Chapter Questions

Problem 11Q

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The initial direct costs incurred in relation to a lease transaction is added to get the right of use asset for the lessor get the net investment for the lessor under a sales-type lease the cost of sales of lessee under a sales-type lease get the net investment for the lessor under a direct finance lease
The initial direct cost is added to the cost of the asset to get the netinvestment in the lease which shall be spread over the lease term. Question: True or False
For a(n) ________ lease, a lessor recognizes revenue on the sale and records the asset, ________ lease. It also removes the leased asset from its accounts and records the ________. Group of answer choices sales-type; net investment in lease–sales-type; cost of goods sold finance; gross investment in lease–sales-type; cost of goods sold operating; net investment in lease–sales-type; cost of goods sold sales-type; finance; revenue
Which of the following statements is true about initial direct costs? A. Initial direct costs of a sales-type lease should be expensed at the commencement of the lease only if no selling profit or loss has been incurred. B. Initial direct costs are ownership-type costs such as insurance, maintenance, and taxes. C. Initial direct costs of an operating lease should be recorded by the lessor as a prepaid asset. D. Initial direct costs should always be debited against income by the lessor in the period of the inception of the lease.
The buyer-lessor recognizes the asset from a sale and leaseback transaction resulting to a finance lease at? carrying amount sale price the lower of the sale price and fair value fair value
The difference of gross investment in the lease and net investment in the lease of the lessor is? A. Total amount of interest that the lessee shall recognized as interest expense over the lease term. B. Interest income at inception of the lease. C. Total amount of interest that the lessor shall recognized as interest income over the lease term. D. Initial direct cost.
In a sale-leaseback transaction, the right-of-use asset is computed as: a. Rights retained by the lessor multiplied by rights retained by the lessee divided by FV of the asset. b. Carrying value of the asset multiplied by the FV of rights retained by the lessee divided by fair value of the asset. c. Lease liability multiplied by useful life divided by total fair value of the asset. d. FV of rights retained by the lessee multiplied FV of the asset divided by carrying value of the asset.
This type of lease involves recognition of a manufacturer’s or dealer’s profitor loss on the transfer of the asset to the lessee. A. Operating leaseB. Sale and leasebackC. Sales type leaseD. Direct financing lease.
Initial direct costs incurred by the lessor under a sales-type lease should be a. Deferred and allocated over the economic life of the leased property. b. Expensed in the period incurred. c. Deferred and allocated over the term of the lease in proportion to the recognition of rental income. d. Added to the gross investment in the lease and amortized over the term of the lease as a yield adjustment.
Describe the lessee's accounting for sale-leaseback transactions.
What are executory costs? How are they accounted for by the lessee in a capital lease when paid by the lessee? When paid by the lessor? Explain.
The cost of an asset purchased purchased under a finance lease will be equal to the carrying amount of the leased asset plus cash payment and the balance of the leased liability. True or False?