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Cr Asset account
Dr Liability account
Cr Statement of comprehensive income
} finance charge for period
Dr Liability account
cash paid in
}
Cr Cash period
9. Which is the correct accounting treatment for an operating lease payment in the accounts of the lessee?
a. Dr Cash Cr Operating lease rentals/statement of
comprehensive income
b. Dr Operating lease rentals/statement of comprehensive income
Cr Cash
c. Dr Asset account Cr Cash
d. Dr Cash Cr Asset account
10. Which is the correct accounting treatment for a finance lease in the accounts of a lessor?
a. Treat as a noncurrent asset equal to net investment in lease. Recognize all finance payments in statement of comprehensive income.
b. Treat as a receivable equal to gross amount receivable on lease. Recognize finance payments in cash and by reducing debtor.
c. Treat as a receivable equal to net investment in the lease. Recognize finance payment by reducing debtor and taking interest to statement of comprehensive
income.
d. Treat as a receivable equal to net investment in the lease. Recognize finance payments in cash and by reduction of debtor.
11. The profit on a finance lease transaction for lessors who are manufacturers or dealers should
a. Not be recognized separately from finance income.
b. Be recognized in the normal way on the transaction.
c. Only be recognized at the end of the lease term.
d. Be allocated on a straight-line basis over the life of the lease.
12. In the case of sale and leaseback transactions, if the sale is at below the fair value of the assets and the loss is compensated by future lease payments, then the loss is
a. Recognized immediately in reserves.
b. Deferred and amortized over the useful life of the asset.
c. Deferred until the end of the lease term.
d. Recognized immediately in the profit and loss.
13. Lessors should show assets that are out on operating leases and income from there as follows:
a. The asset should be kept off the statement of financial position and the lease income should go to reserves.
b. The asset should be kept off the statement of financial position and the lease income should go to the statement of comprehensive income.
c. The asset should be shown in the statement of financial position according to its nature and the lease income should go to reserves.
d. The asset should be shown in the statement of financial position according to its nature with the lease income going to the statement of comprehensive income.
14. The current accounting standard IAS 17, Leases, was criticized for not reflecting current practice. Why was there a need to look to change IAS 17?
a. The FASB wanted change.
b. To ensure comparability and bring leasing finance onto the statement of financial position.
c. For legal reasons.
d. Because of the recent credit crisis.
15. What is the fundamental principle that is driving the proposed leasing standard?
a. All leases should be treated as if they were finance leases.
b. All leases should be treated as if they were operating leases.
c. All leases should be off statement of financial position.
d. All leases should be treated as intangible assets.
16. On what basis would the lessee recognize a leasing asset in the statement of financial position?
a. Ownership.
b. Right to receive rental payments.
c. Right to use the asset.
d. On signing a contractual agreement.