Reasons 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.
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- Which one of the following is not an advantage of leasing fixed asset? a. Repairs and maintenance are borne by the lessor b. Risk of loss due to obsolescence is on the lessee c. Lessee has access to asset without the need to purchase the asset d. Lessor becomes the owner of the assetA company can either purchase or lease an asset. When comparing the two alternatives, which of the following is not an advantage of buying and financing the asset? (a) the possibility of receiving an investment tax credit (b) Obtaining a tax deduction for the depreciation expense (c) The potential of the asset to appreciate in value (d) Improved financial leverageWhen does a buyer-lessor recognize a financial asset from a sale and leaseback transaction? Fair Value > Carrying Amount Fair Value < Carrying Amount Sale Price > Fair Value Sale Price < Fair Value
- One of the following statements is false: a. If the underlying asset will not revert to the lessor, the residual value is simply ignored by the lessor in the computation of unearned interest income and gross profit on the sale. b. The underlying asset will remain with the lessee if the lease provides for either a purchase option that is reasonably to be exercised or transfer of title to the lessee upon the lease expiration. c. When a lessor actually sells an asset that it has been leasing, the difference between the sales price and the carrying amount of the lease receivable is recognized in profit or loss. d. The gain or loss that pertains to the right retained by the seller-lessee in a sales and leaseback transaction is not recognized.If a company uses the fair value model to value investment property, changes in the fairvalue of the asset are least likely to aff ect:A. net income.B. net operating income.C. other comprehensive income.If an entity has elected to use the fair value option for a financial liability; a. It is measured at fair value through other comprehensive income. b. It is measured at fair value through profit or loss. c. It is measured at amortized cost. d. Fair value op don is prohibited for financial liabilities.
- s) Which of the following is NOT one of the benefits of leasing an asset from another company? ... O Protection against obsolescence O Complete financing O Lower interest rates than normal debt O Increased likelihood of sale1. In a sale and leaseback transaction, what is used by the buyer-lessor to depreciate the cost of the leased asset? A. Lease term B. Total Useful life C. Excess of useful life over the lease term D. Remaining useful life 2. Which of the following scenarios regarding a sale and leaseback transaction would result to a loss to the seller-lessee? A. Fair Value < Carrying Amount B. Sale Price < Fair Value C.Sale Price > Fair Value D.Fair Value > Carrying Amount 3. When does a buyer-lessor recognize a financial asset from a sale and leaseback transaction? A. Sale Price > Fair Value B. Fair Value < Carrying Amount C. Sale Price < Fair Value D. Fair Value > Carrying AmountLeasing can be beneficial due to: A Tax advantages for both lessors and lessees. B D Guaranteed asset ownership at the end of the lease term. Lower upfront costs compared to purchasing the asset. Reduced maintenance and repair responsibilities for the lessee.
- Sale of real estate is subject to VAT. True, if not made in the regular course of trade or business False, it is exempt if the real estate is classified as capital asset False, it is exempt if what is sold is a resi¬dential unit True, if the real estate is classified as capital assetIn a sale and leaseback transaction, which of the following statements is most incorrect? A. The seller-lessee records a rent expense. B. The buyer-lessor recognizes an gain. C. The seller-lessee derecognizes an asset. D. The buyer lessor recognizes an income.When a company sells an asset and simultaneously leases it back, what criteria must be met to apply saleleaseback accounting rather than accounting for the transaction as a loan ?
