Home / My Courses / ACC211_6387_2021-2022_2NDSEM-SEM_CAE / Week 15 to 16- 7th Exam Coverage / Quiz Finance Lease - Lessee

Question 1
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    A lease liability is measured at

Select one:
a.     The absolute amount of lease payments

b.     The present value of fixed lease payments

c.
    The fair value of the underlying asset

d.     The present value of lease payments

Clear my choice

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 Question 2
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Erlyn company leased a new machine from Norie company

on January 1, 2017 with the
following information:
Annual rental payable at the beginning of each lease
year              400,000
Lease term                                                                                     10
years

Useful life of machine                                                                      12

years
Implicit interest rate                                                                         14%

Present value of an annuity of 1 in advance for 10

periods at 14%        5.95
Present value of 1 for 10 periods at 14%                                          0.27

Erlyn
company has the option to purchase the machine on January 1, 2027 by paying 500,000.  The purchase option is
reasonably certain to
be exercised.  What is the initial cost
of the right of use asset to be recognized by Erlyn
company?

 Answer
format:

 1,500,000

Answer: 2,380,000

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 Question 3
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On December 31, 2018, Tyler company leased equipment

from another entity with the
following data:
·      
The
estimated seven-year useful equipment life coincides with the lease term.
·      
The
first of the seven equal annual P800,000 lease payments was paid on December
31, 2018.
·      
The implicit
interest rate is 12%.
·      
Tyler’s
incremental borrowing rate is 14%.

·      
Present
values of an annuity of 1 in advance for seven years are 5.11 at 12% and 4.89
at 14%.
 What
amount of depreciation will be recognized in 2018?

 Answer
format:
 1,500,000

Answer: 584,000

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 Question 4
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On January 1, 2018, Stefan company leased two

automobiles for executive use.  The lease
required Stefan company to make five annual payments of 1,950,000 beginning
January 1,
2018.  At the end of the lease
term, December 31, 2022, Stefan company had a residual
value guarantee of the
automobiles at a total of 1,500,000.  The
interest rate implicit in the
lease is 9%. 
Present value factors for the 9% rate implicit in the lease are:
For an annuity due with 5 payments (in advance)          4,240

For an ordinary annuity with 5 payments                     3.890

Present value of 1 for 5 periods                                  0.650

What amount should be reported

as lease liability immediately after the first required
payment?
         Answer format:       
         1,500,000

Answer: 5,343,000

Question 5
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On January 1,2018, Blue company signed a long-term

lease for an office building.  The
terms
of the lease required Blue company to pay 150,000 annually, beginning December
31,
2018, and continuing each year for 30 years.  On January 1, 2018, the present value of the
lease payments is 1,687,500 at the 8% interest rate implicit in the lease.  What amount
should be reported as lease
liability on December 31, 2018?
 

Answer format:
 

1,500,000

Answer: 1,537,500

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