acct ch 21 (21-30)

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interest revenue.
high residual values.
tax incentives.
all of these.

21. Major reasons why a company may become involved in leasing to other companies is (are)

Off-balance-sheet financing
Less costly financing
100% financing at fixed rates
All of these

22. Which of the following is an advantage of leasing?

Leases similar to installment purchases are capitalized.

23. Which of the following best describes current practice in accounting for leases?

a lease reflects the purchase or sale of a quantifiable right to the use of property.

24. While only certain leases are currently accounted for as a sale or purchase, there is theoretic justification for considering all leases to be sales or purchases. The principal reason that supports this idea is that

lessor conveys less than his or her total interest in the property

25.An essential element of a lease conveyance is that the

The lessee must increase the present value of the minimum lease payments by the present value of the option price.

26. What impact does a bargain purchase option have on the present value of the minimum lease payments computed by the lessee?

present value of the minimum lease payments or the fair value of the asset, whichever is lower.

27. The amount to be recorded as the cost of an asset under capital lease is equal to the

operating and capital lease methods.

28. The methods of accounting for a lease by the lessee are

The lease term is equal to or more than 75% of the estimated economic life of the leased property.

29. Which of the following is a correct statement of one of the capitalization criteria?

penalty for failure to renew.
bargain purchase option.
guaranteed residual value.
any of these.

30. Minimum lease payments may include a

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