Professional Documents
Culture Documents
Ch12 Leases
Ch12 Leases
Ch12 Leases
to accompany
Applying International
Accounting Standards
by
Alfredson, Leo, Picker, Pacter & Radford
Prepared by
Victoria Wise
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CHAPTER 12 Leases
Question 1
According to IAS 17 Leases, because lease payments are made over the lease term, the payments
must be divided into the following components:
Reduction of the lease liability
Interest expense incurred
Reimbursement of lessor costs
Receipt of lease incentives
A
B
C
D
I
II
Yes Yes
Yes No
Yes Yes
No No
III IV
No Yes
Yes No
Yes No
Yes Yes
I;
II;
III;
IV.
Question 2
In relation to finance leases, the following information must be disclosed separately in the
financial statements of lessors:
I.
II.
III.
IV.
A
B
C
D
I, II and IV only;
I, III and IV only;
II, III and IV only;
II and IV only.
Question 3
When substantially all of the risks and rewards incident to ownership remain with the lessor, the
arrangement is treated as:
A
B
C
an operating lease;
a finance lease;
a sale and leaseback;
-3D
Question 4
Under IAS 17 Leases, lessors are required to account for lease receipts from operating leases as:
A
B
C
D
Question 5
Adam Limited and Davies Limited enter into a finance lease agreement with the following terms:
lease term is 3 years
estimated economic life of the leased asset is 6 years
3 x annual rental payments of $23 000; each payment is one year in arrears
residual value at the end of the lease term is not guaranteed by the lessee
interest rate implicit in the lease is 7%
On inception date, the present value of the minimum lease payments is:
A
B
C
D
$69 000;
$64 584;
$64 170;
$60 359.
Question 6
In respect to non-cancellable operating leases, lessees are required under IAS 17 Leases, to
disclose the total of future minimum lease payments for each of the following periods:
A
B
C
D
Question 7
With respect to operating leases, lessors are required under IAS 17 Leases, to make the following
disclosures:
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I.
II.
III.
IV.
Question 8
A lessee when accounting for a lease incentive received under an operating lease treats is as a:
A
B
C
D
Question 9
Burgess Limited accepts a lease incentive to enter into a 3-year operating lease for a building.
The incentive is a cash amount of $5 000 received on signing of the lease agreement. The lessee
initially records this transaction as follows:
A
B
C
D
DR
CR
DR
CR
DR
CR
DR
CR
Lease expense
$5 000
Cash
Incentive from lessor $5 000
Cash
Incentive to lessee
$5 000
Rent income
Cash
$5 000
Lease incentive from lessor
$5 000;
$5 000;
$5 000;
$5 000.
Question 10
Timely Limited accepts a lease incentive to enter into a 4-year operating lease for equipment.
The incentive is cash amounting to $10 000 that will be paid on the date the lease agreement is
signed. On inception of the lease, the lessor will record:
A
DR Cash
$10 000
CR
Incentive to lessee
$10 000;
-5B
C
D
DR Incentive to lessee
CR
Cash
DR Rent income
CR
Rent expense
DR Cash
CR
Rent income
$10 000
$10 000;
$10 000
$10 000;
$10 000
$10 000.
Question 11
A lease transaction that involves the sale of an asset that is then leased back to the seller for all or
part of its remaining economic life is known as:
A
B
C
D
Question 12
If a sale and leaseback transaction results in a finance lease, IAS 17 Leases, provides the
following accounting treatment for any excess of sales proceeds over the carrying amount:
A
B
C
D
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ANSWERS
1
10
11
12