.

If the lessor records the unearned rent at the inception of a lease, then the lease must:
(a) be an operating lease
(b) be a direct financing lease
(c) contains a bargain purchase option
(d) be an annuity due A
2. Generally accepted accounting principles require that certain lease agreements be accounted
for as purchases. The theoretical basis for this treatment is that a lease:
(a) provides the use of the leased asset to the lessee for a limited period of time
(b) effectively conveys all of the benefits and risks incident to the ownership of property
(c) is an example of form over substance
(d) must be recorded in accordance with the concept of cause and effect B
3. The classification of leases, from the standpoint of the lessee, are:
(a) finance, directing financing, or sales type
(b) direct financing, or sales type
(c) direct financing, sales type, or operating
(d) finance or operating D
4. When a nonrefundable down payment on a leased asset is made in advance under an
operating lease, at the payment date, the lessor credits:
(a) lease liability
(b) unearned rent
(c) cash
(d) rent revenue B
5. The basic accounting issue for lessors is:
(a) computing depreciation on the leased asset
(b) revenue recognition during the lease term
(c) determination of the cost of the leased asset
(d) expense recognition during the lease term B
6. Which of the following is the complete list of classifications of leases from the standpoint of
the lessor?
(a) direct financing, sales type, and operating
(b) direct financing, sales type, and leveraged
(c) direct financing, and sales type
(d) direct financing, sales type, leveraged, and operating D
7. The term usually used to describe the situation where a lessee has an option to purchase the
leased property at a price that is sufficiently lower than its fair market value so that the
exercise of the option appears reasonably assured is:
(a) assured purchase option
(b) bargain buy-out option
(c) bargain purchase option
(d) bargain renewal option C

8. If the lessor and lessee use different interest rates to account for a finance lease, then:
(a) the lessor will use different account titles to record the leasing transaction
(b) total expenses (or revenues) will be equal for each
(c) total expenses (or revenues) will be different for each
(d) the lessee and lessor cannot use different interest rates