QUESTIONS VERSION A

1. At inception of a contract, an entity is required to assess whether the contract is or contains

a lease. A contract is or contains a lease if…
a. The assets that is the subject of a lease specifically identified
b. A lease convey the right to control the assets to the lessor
c. There is transfer of specific assets
d. There is a right to control the asset and the asset is specifically identified

2. A utility company (costumers) enters into a contract with a power company (supplier) to
purchase all of the electricity produced by a new solar farm for 20 year. The correct
statement related to this transaction is..
a. This is not a lease transaction because the physical of the asset is under the supplier
control
b. This is a normal purchase transaction and costumer will record the purchase as cost
of inventory
c. This is a lease transaction because the costumer has the right to obtain all of the
economic benefit from use of the solar farm during the contract period
d. This is not a lease transaction because costumer did not design the asset and supplier
operates the asset

3. Bellow contract is, or contains a lease except …….

a. Costumers enter into a contract with supplier for the use of specified ship for a five year
period
b. Coffee company (costumer) enters into a contract with an airport operator (supplier) to
use a space in the airport to sell its good for a three year period
c. A utility company (costumers) enters into a contract with a power company (supplier)
to purchase all of the electricity produced by a new solar farm for 20 year.
d. Costumers enters into a contract with an information technology company (supplier)
for the use of identified server for three years.

4. The IASB provides an exception for the required capitalization of all leases by the lessee
for
a. leases of underlying assets with low value only.
b. short-term leases with a term of 12 months or less only.
c. leases of underlying assets with low value and short-term leases with a term of 12
months or less.
d. None of these are correct.

5. The amount to be recorded as the “the right of use asset” under finance lease method is
equal to the
a. present value of the lease payments.
b. present value of the lease payments plus present value of guaranteed residual value
c. present value of the lease payments plus the present value of any unguaranteed
residual value.
d. carrying value of the asset on the lessor’s books.

6. Lease payment consist the following items, except..

a. Periodic fixed payment
b. Variable payment that are based on index
c. Unguaranteed residual value
d. Bargain purchase option that is reasonably certain to exercise
7. A lessee with a finance lease containing a bargain purchase option should depreciate the
leased asset over the
a. asset’s remaining economic life.
b. term of the lease.
c. life of the asset or the term of the lease, whichever is shorter.
d. life of the asset or the term of the lease, whichever is longer.

8. Under finance lease method, what expenses would be recorded by lessee..

a. Depreciation Expense
b. Interest Expense
c. Rental expense
d. Depreciation Expense and Interest Expense
9. Which of the following is not one of the lease classification tests for lessor?
a. Transfer of ownership
b. Purchase option
c. Lease term
d. Collectability

10. In computing the present value of the lease payments, the lessee should
a. use its incremental borrowing rate in all cases.
b. use both its incremental borrowing rate and the implicit rate of the lessor, assuming
that the implicit rate is known to the lessee.
c. use the implicit rate of the lessor, assuming that the implicit rate is known to the lessee.
d. use the implicit rate in all cases.

11. Under finance lease method, the lessee record the following except…
a. Rental expense
b. Depreciation expense
c. Interest expense
d. Lease liability

12. When lessors account for residual values related to leased assets, they
a. include the residual value in the receivable measurement because it is assumed the
residual value will be realized.
b. include the unguaranteed residual value in sales revenue.
c. recognize more gross profit on a sales-type lease with a guaranteed residual value
than on a sales-type lease with an unguaranteed residual value.
d. reduce the residual value by the executory costs.

QUESTIONS VERSION B

1. The lease receivable amount includes the present value of

a. rental payments plus the present value of guaranteed and unguaranteed residual
values.
b. rental payments only.
c. rental payments plus the present value of the unguaranteed residual value only.
d. rental payments plus the present value of the guaranteed residual value only.

2. The Lease Liability account should be disclosed as

a. a current liability.
b. a noncurrent liability.
c. current portions in current liabilities and the remainder in noncurrent liabilities.
d. deferred credits.
3. In computing depreciation of a leased asset where there is no bargain purchase option,
the lessee should subtract
a. no residual value and depreciate over the term of the lease.
b. an unguaranteed residual value and depreciate over the term of the lease.
c. a guaranteed residual value and depreciate over the life of the asset.
d. an unguaranteed residual value and depreciate over the life of the asset.

4. Under finance lease method, the journal entry by the lessee for the periodic lease payment
is
a. Debit interest expense, credit cash
b. Debit rental expense, credit cash
c. Debit rental expense and interest expense, credit cash
d. Debit lease liability and interest expense, credit cash

5. The amount to be recorded as the “the right of use asset” under finance lease method is
equal to the
a. present value of the lease payments.
b. present value of the lease payments plus present value of guaranteed residual value
c. present value of the lease payments plus the present value of any unguaranteed
residual value.
d. carrying value of the asset on the lessor’s books.

6. Lease payment consist the following items, except..

a. Periodic fixed payment
b. Variable payment that are based on index
c. Unguaranteed residual value
d. Bargain purchase option that is reasonably certain to exercise

7. A lessee with a finance lease containing a bargain purchase option should depreciate the
leased asset over the
a. asset’s remaining economic life.
b. term of the lease.
c. life of the asset or the term of the lease, whichever is shorter.
d. life of the asset or the term of the lease, whichever is longer.

8. Under finance lease method, what expenses would be recorded by lessee..

a. Depreciation Expense
b. Interest Expense
c. Rental expense
d. Depreciation Expense and Interest Expense

9. At inception of a contract, an entity is required to assess whether the contract is or contains

a lease. A contract is or contains a lease if…
a. The assets that is the subject of a lease specifically identified
b. A lease convey the right to control the assets to the lessor
c. There is transfer of specific assets
d. There is a right to control the asset and the asset is specifically identified

10. A utility company (costumers) enters into a contract with a power company (supplier) to
purchase all of the electricity produced by a new solar farm for 20 year. The correct
statement related to this transaction is..
a. This is not a lease transaction because the physical of the asset is under the supplier
control
b. This is a normal purchase transaction and costumer will record the purchase as cost
of inventory
 c. This is a lease transaction because the costumer has the right to obtain all of the
economic benefit from use of the solar farm during the contract period
d. This is not a lease transaction because costumer did not design the asset and supplier
operates the asset

11. Bellow contract is, or contains a lease except …….

a. Costumers enter into a contract with supplier for the use of specified ship for a five
year period
b. Coffee company (costumer) enters into a contract with an airport operator (supplier) to
use a space in the airport to sell its good for a three year period
c. A utility company (costumers) enters into a contract with a power company (supplier)
to purchase all of the electricity produced by a new solar farm for 20 year.
d. Costumers enters into a contract with an information technology company (supplier)
for the use of identified server for three years.

12. The IASB provides an exception for the required capitalization of all leases by the lessee
for
a. leases of underlying assets with low value only.
b. short-term leases with a term of 12 months or less only.
c. leases of underlying assets with low value and short-term leases with a term of 12
months or less.
d. None of these are correct.