02 Jan Amortization Expense

Quiz 7

1. Question :

(TCO 8) For the lessee to account for a lease as a capital lease, the lease must meet

all four of the criteria specified by GAAP regarding accounting for leases.

any one of the six criteria specified by GAAP regarding accounting for leases.

any two of the criteria specified by GAAP regarding accounting for leases.

any one of the four criteria specified by GAAP regarding accounting for leases.

Question 2. Question :

(TCO 8) GAAP requires that some lease agreements be accounted for as purchases. The theoretical justification for this treatment is that a lease of this type

complies with the concept of form over substance.

reflects the relationship of cause and effect.

satisfies the concept of historical cost.

conveys most of the risks and benefits of property ownership.

Question 3. Question :

(TCO 8) One of the four criteria for a capital lease specifies that the lease term be equal to or greater than

75% of the expected economic life of the leased property.

90% of the expected economic life of the leased property.

80% of the expected economic life of the leased property.

50% of the expected economic life of the leased property.

Question 4. Question :

(TCO 8) On February 1, 2011, our company became the lessee of equipment under a five-year, noncancelable lease. The estimated economic life of the equipment is eight years. The fair value of the equipment was $600,000. The lease does not meet the definition of a capital lease in terms of a bargain purchase option, transfer of title, or the lease term. However, we must classify this as a capital lease if the present value of the minimum lease payments is at least

$600,000.

$540,000.

$450,000.

$405,000.

Question 5. Question :

(TCO 8) Which of the following would a lessee not record in connection with a lease?

Lease Revenue

Amortization Expense

IN Interest Revenue

Lease Expense