ACC 563 Week 9 Quiz – Strayer NEW
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Week
9 Quiz 7: Chapters 13 and 14
Chapter
13
1.
Under the capital method of accounting for
leases the excess of aggregate rentals over the cost of leased property should
be recognized as revenue of the lessor
a. In increasing amounts during the term of the
lease
b. In constant amounts during the term of the
lease
c. In decreasing amounts during the term of the
lease
d. After the cost of leased property has been
fully recovered through rentals
Answer
2.
When measuring the present value of future
rentals to be capitalized as part of the purchase price in a lease that is be
accounted for as a purchase, identifiable payments to cover taxes, insurance,
and maintenance should be
a. Included
in the future rentals to be capitalized
b. Excluded
from future rentals to be capitalized
c. Capitalized
but at a different discount rate and recorded in a different account than
future rental payments
d. Capitalized
but at a different discount rate and for a relevant period that tends to be
different than that for future rental payments
Answer
3.
Equal monthly rental payments for a particular
lease should be charged to rental expense by the lessee for which of the
following?
Capital lease Operating lease
a.
Yes
No
b.
Yes Yes
c.
No No
d.
No
Yes
Answer
4.
In a lease that is recorded as a sales-type
lease by the lessor, the difference between the gross investment in the lease
and sum of the present values of the components of the gross investment should
be recognized as income
a. In full at the lease’s expiration
b. In full at the lease’s inception
c. Over the period of the lease using the
interest method of amortization
d. Over the period of the lease using the
straight-line method of amortization
Answer
5.
For a six-year capital lease, the
portion of the minimum lease payment in the third year applicable to the
reduction of the obligation should be
a. Less than in the second year
b. More than in the second year
c. The same as in the fourth year
d. More than in the fourth year
Answer
6.
Based solely upon the following sets of circumstances, indicate below which
set gives rise to a sales type or direct financing lease of a lessor:
Transfers Contains
Ownership bargain
By end of purchase
Lease? Provision?
a.
No Yes
b.
Yes
No
c.
Yes
Yes
d.
No No
Answer
7.
Generally accepted accounting principles
require that certain lease agreements be accounted for as purchases. The
theoretical basis for this treatment is that a lease of this type
a. Effectively
conveys all of the benefits and risks incident to the ownership of property
b. Is an example of form over substance
c. Provides the use of the leased asset to the
lessee for a limited period of time
d. Must be recorded in accordance with the
concept of cause and effect
Answer
8.
The appropriate valuation of an
operating lease on the statement of financial position of a lessee is
a. Zero
b. The
absolute sum of the lease payments
c. The
present value of the sum of the lease payments discounted at an appropriate
rate
d. The market value of the asset at the date of
the inception of the lease
Answer
9.
A six-year-capital lease entered into on
December 31, 2008, specified equal minimum annual lease payments due on
December 31, 2010. Minimum payment applicable to which of the following
increased over the corresponding December 31, 2010, minimum payment?
Reduction of
Interest
Expense
Liability
a.
Yes Yes
b.
Yes No
c.
No Yes
d.
No No
Answer
10. Office
equipment recorded under a capital lease containing a bargain purchase option
should be amortized
a. Over the period of the lease using the
interest method of amortization
b. Over the period of the lease using the
straight-line method of amortization
c. In a manner consistent with the lessee’s
normal depreciation policy for owned assets
d. In a manner consistent with the lessee’s
normal depreciation policy for owned
assets except that the period of amortization should be the lease term
Answer
11. What
is the primary accounting issue for lessees?
a. Recording
interest expense on the lease obligation.
b. Determining
whether the lease meets the 90% of fair value test.
c. Off-balance
sheet financing.
d. The
measurement of the leased asset under a capital lease.
Answer
12. What
is the primary accounting issue for lessors?
a. Off-balance
sheet financing.
b. Revenue
recognition and expense allocation over the lease term.
c. Treating
the lease in the same manner as the lessee does.
d. Determining
whether the lease is a sales-type lease or a direct financing lease.
Answer
13. For
the lessor to recognize a lease as a sales-type lease, the following must
occur.
a. At
least one of the capital lease criteria is met, at least one of the certainty
criteria is met, and there is a manufacturer or dealer’s profit.
b. At
least one of the capital lease criteria is met, both certainty criteria are
met, and there is a manufacturer or dealer’s profit.
c. More
than one of the capital lease criteria are met, both certainty criteria are
met, and there is a manufacturer or dealer’s profit.
d. Only
one of the capital lease criteria is met, both certainty criteria are met, and
there is a manufacturer or dealer’s profit.
Answer
14. A
net operating loss carryover that occurs in a company’s second year of
operations
a. May
cause a company to report a tax benefit in the current period income statement.
b. Has
no effect on income tax expense of the current period because no taxes are
paid.
c. Causes
a company to report a deferred income tax liability for taxes that are not paid
currently.
d. Results
in future taxable amounts.
Answer
15. For
a sales-type lease, the net investment is equal to
a. The
present value of the minimum lease payments plus executor costs.
b. The
net investment minus unearned income.
c. Sales
minus the gross profit recognized on the sale.
d. The
present value of the gross investment.
Answer
16. When
a lease contract does not transfer title to the lessee, there is no bargain
purchase option, and the lease term is not at least 75 percent of the estimated
useful life of the leased asset.
a. The
lessee must classify the lease as an operating lease.
b. The
amount of unguaranteed salvage value, if any, determines whether the lease is a
capital lease or an operating lease.
c. The
interest rate used to determine the present value of the minimum lease payments
also determines whether the lease is a capital lease or an operating lease.
d. The
lessee must use the greater of the lessor’s rate of return or the lessee’s
incremental borrowing rate to determine whether the lease is a capital lease or
an operating lease.
Answer
17. When
does the lessee report executory costs as an expense?
a. When
they are spelled out in the lease agreement.
b. Only
when they are incurred by the lessee and the lease is classified as a capital
lease.
c. When
they are incurred by the lessee.
d. Only
when they are incurred by the lessee and the lease is classified as an
operating lease.
Answer
18. If
the lessor incurs initial direct cost to bring about the lease, when are those costs
expensed in total during the first year of the lease term.
a. When
the lease is classified as a sales-type lease.
b. When
the lease is classified as a direct financing lease.
c. When
the lease is classified as an operating lease.
d. Initial
direct costs are always expensed during the first year of the lease term.
Answer
19. When
a sale and leaseback occurs
a. A
gain or loss on the sale of the leased asset is deferred and amortized over the
lease term .
b. A
gain on sale of the leased asset is deferred and amortized over the lease term.
c. Whether
a gain or loss on sale of the leased asset is deferred and amortized over the
lease term depends on whether the lease is classified as a capital lease or an
operating lease.
d. Both
gains and losses are recognized in earnings when the asset is sold.
Answer
20. Which
of the following would indicate that the lessee should not classify a
lease as a capital lease?
a. The
fair value of the leased asset is $100,000 and the present value of the minimum
lease payments is $95,000.
b. The
lease provides for no unguaranteed salvage value.
c. The
lessee has the option to purchase the leased asset in 4 years for $2 when the
asset’s salvage value is expected to be $20,000.
d. The
asset’s useful life is 20 years, a 4 year lease occurs when the asset is 26
years old.
Answer
Essay
1. List
four advantages of leasing over the purchase of property for use by a business.
2. Define
the following:
a.
Capital lease
b.
Operating lease
3. List
the four criteria for recording a lease transaction as a capital lease.
4. How
is the recorded amount of a lessee capital lease determined?
5. What
is the difference between a sales-type and a direct financing type of capital
lease?
6. What
is a leveraged lease? How do lessees and
lessors record leveraged leases?
EXAMPLE
TEST QUESTIONS
Chapter 14
Multiple Choice
1. APB
Opinion No. 8 set minimum and maximum limits on the annual provision for
pension cost. An amount that was always included in the calculation of both the
minimum and the maximum limit is
a. Normal cost
b. Amortization of past service cost
c. Interest on unfunded past and prior service
costs
d. Retirement benefits paid
2. In
accounting for a pension plan, any difference between the pension cost charged
to expense and the payments into the fund should be reported as
a. An offset to the liability for prior service
cost
b. Accrued or prepaid pension cost
c. An operating expense in this period
d. An accrued actuarial liability
Answer
3. Benefits
under a pension plan that are not contingent upon an employee’s continuing
service are
a. Granted under a plan of defined contribution
b. Based upon terminal funding
c. Actuarially unsound
d. Vested
Answer
4. According
to SFAS No. 87, “Employer’s Accounting for Pensions,” gains and losses should
be
a. Fully
allocated to current and future periods
b. Offset
against pension expense in the year of occurrence
c. Allocated
if any unrecognized gain or loss at the beginning of the year is in excess of
10 percent of the greater of the projected benefit obligation or the market
value of the plan assets
d. Disclosed
in a note to the financial statements only
A
7. \
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