Post Assessment Long Quiz 2 Attempt Review

Started on Wednesday, 10 August 2022, 1:46 PM
State Finished
Completed on Wednesday, 10 August 2022, 4:46 PM
Time taken 3 hours
Grade 53.00 out of 70.00 (76%)
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Question 1
Incorrect Mark 0 out of 1
Initial direct cost paid by the lessor related to the acquisition of the leased asset is recognized in the books of
the lessor as
Select one:
An outright expense by the lessor
Part of the cost of the leased asset and depreciated over its useful life
Deferred Initial Direct Cost and amortized over the useful life of the leased asset
Deferred Initial Direct Cost and amortized over the lease term

Your answer is incorrect.

The correct answer is:
Part of the cost of the leased asset and depreciated over its useful life
Question 2
Correct Mark 1 out of 1
Instruction:
Write your answer without a peso sign and without commas.
Please follow the sample answer: 1000000
Answer: 604492 
The correct answer is: 604492

Question 3
Instruction:
Answer: 10125000 
Question 4
Net investment in a direct financing lease is equal to
Select one:
Cost of the asset plus guaranteed residual value
Cost of the asset plus initial direct cost paid by the lessor 
Cost of the asset minus guaranteed residual value
Cost of the asset
Your answer is correct.

Cost of the asset plus initial direct cost paid by the lessor
Question 5
Instruction:
Answer: 900000 
Question 6
Which of the following statements is true about low value lease?
Select one:
The value of an underlying asset is based on the value of the asset when new regardless of the age of the asset.

All of these statements are true about low value lease.
The term of a low value lease may not be more than twelve months.
An underlying asset may qualify as low value lease even if the nature of the asset is such that the asset is typically not of low value when new.

The value of an underlying asset is based on the value of the asset when new regardless of the age of the asset.
Question 7
Gross investment in the lease is equal to
Select one:
Sum of the lease payments receivable by a lessor under a finance lease and any unguaranteed residual value accruing to the lessor
The lease payments under a finance lease of the lessor


Present value of lease payments under a finance lease of the lessor and any unguaranteed residual value
Present value of lease payments under a finance lease of the lessor

Sum of the lease payments receivable by a lessor under a finance lease and any unguaranteed residual value accruing to the lessor
Question 8
Instruction:
At the beginning of current year, Rapp Company leased a new machine to Lake Company for 5 years. The
annual rental is P900,000.Additionally, Lake Company paid P500,000 to Rapp Company as a lease bonus and
P250,000 as a security deposit to be refunded upon expiration of the lease. What amount should be reported as
rent revenue for the current year?
Answer: 1000000 

Question 9
Instruction:
Answer: 391800 
Question 10
Instruction:
Answer: 130000 

Question 11
Lease payments under an operating lease shall be recognized as an income by the lessor on
Select one:
Sum of units basis
Diminishing balance basis
Cash basis
Straight line basis over the lease term



Straight line basis over the lease term
Question 12
Instruction:
Answer: 9025000 

Question 13
Instruction:
Answer: 800000 
Question 14
Instruction:
Answer: 630000 

Question 15
Under a direct financing lease, the excess of aggregate rentals over the cost of the underlying asset should be
recognized as interest income of the lessor
Select one:
After the cost of the underlying asset has been fully recovered through rentals
In increasing amounts during the term of the lease
In constant amounts during the term of the lease
In decreasing amounts during the term of the lease



In decreasing amounts during the term of the lease
Question 16
The profit on a finance lease transaction for lessors who are manufacturers or dealers should
Select one:
Be recognized on a straight-line basis over the lease term


Only be recognized at the end of the lease term
Not be recognized separately from finance income
Be recognized in the normal way on the transaction

Be recognized in the normal way on the transaction
Question 17
Instruction:
Chocho leases and operates a retail store. The following information relates to the lease for the current year:

(1) the store lease an operating lease, calls for a base monthly rent of 15,000 on the first day of each month .
(2) Additional rent is computed at 6% of net sales over 3,000,000-6,000,000 and 5% of net sales over 6,000,000
per year.
(3) Net sales for the year amounted to 9,000,000.
(4) The entity paid executory costs to the lessor for property taxes of 12,000 and insurance of 5,000.
What total amount of expenses should be reported for the year?
Answer: 17000 
Question 18
Instruction:
Answer: 5250000 

Question 19
Instruction:
Answer: 480000 
Question 20
Applying operating lease in the point of view of the lessee the lease payments are recognized as
Select one:
Prepaid Rent
RIght of Use Asset
Rent Expense

Property and equipment

Rent Expense
Question 21
Instruction:
On May 1, 2020, Hug Company leased equipment to Rave Company which expires May 1, 2021. Rave Company
could have bought the equipment from Hug for P3,200,000 instead of leasing it. Hug’s accounting records
showed a carrying amount for the equipment on May 1, 2020 of P2,800,000. Hug’s depreciation on the
equipment in 2020 was P360,000.During 2020, Rave Company paid P720,000 in rentals to Hug Company for the
8-month period. Hug incurred maintenance and other related costs under the terms of the lease of P64,000 in
2020.After the lease with Rave Company expires, Hug Company will lease the equipment to another entity for
two years. What is the pretax income derived by Hug for 2020?
Answer: 296000 
Question 22
In a direct financing lease, unearned interest income
Select one:
Does not arise
Should be amortized over the lease term using the interest method
Should be recognized at the lease expiration
Should be amortized over the lease term using the straight line method


Should be amortized over the lease term using the interest method
Question 23
The lease receivable in a direct financing lease is
Select one:
The gross amount of lease payments


The present value of lease payments
The difference between the gross rentals and the fair value of the leased asset
The cost of the asset less any accumulated depreciation

The present value of lease payments
Question 24
All of the following would be included in the lease receivable, except
Select one:
A purchase option that is reasonably certain
Unguaranteed residual value
All would be included


Guaranteed residual value

All would be included
Question 25
Instruction:
As an inducement to enter a lease, Iwabe, a lessor, granted Inojin, a lessee, nine months of free rent under a five
year operating lease. The lease was effective July 1, 2019 and provided for monthly rental of 10,000 to begin
April 1, 2020. In the income statement for the year ended June 20, 2020, What amount should be reported as
rent expense?
Answer: 127500 

Question 26
Instruction:
Answer: 2800000 
Question 27
Instruction:
A lessor, leased an equipment under an operating lease. The lease term is 5 years and the lease payments are
made in advance on January 1 of each year. P1,000,000 for 2020 and 2021; P1,400,000 for 2022; P1,700,000 for
2023 and P1,900,000 for 2024. On December 31, 2021, what amount should be reported as rent receivable
Answer: 800000 

Question 28
Instruction:
Answer: 146000 
Question 29
Instruction:
Answer: 1666000 

Question 30
Instruction:
At the beginning of the current year, Wren Company leased a building to Brill Company under an operating
lease for ten years at P500,000 to a real estate broker as initial direct cost. The building is depreciated P120,000
per year. Wren Company incurred insurance and property tax expense totaling P90,000 for the current year.
What is the net rent income for the current year?
Answer: 275000 
Question 31
Instruction:
On January 1, 2019, Sarada signed a 5 -year operating lease for office space at 96,000 per year. The lease
included a provision for additional rent of 5% of annual company sales in excess of 5,000,000. The sales for the
year ended December 31, 2019 totaled 6,000,000. Upon execution of the lease, the entity paid 24,000 as bonus
for the lease. What is the rent expense for the year ended December 31, 2019?
Answer: 170000 

Question 32
Instruction:
Answer: 516000 
Question 33
Instruction:
Answer: 720000 

Question 34
Instruction:
Barnel Company owns and manages apartments. On signing a lease, each tenant must pay the first month
and last month rent and a P50,000 refundable security deposit. The security deposit is rarely refundable in total
because cleaning costs of P15,000 per apartment are almost always deducted. About 30% of the time, the
tenants are also charged for damages to the apartment which typically cost P10,000.If a one-year lease is
signed on a P90,000 per month apartment, what amount should be reported as refundable security deposit?
Answer: 50000 
Question 35
Instruction:
On July 1, 2019, Mitsuki leased office space for five years at P15,000 a month. On that date, the entity paid the
lessor the security deposit of 35,000; first month rent of 15,000; last month rent of 15,000 and nonrefundable
reimbursements to lessor for modifications to the leased premises of 90,000. The entity made timely rental
payments from August 1 to December 1. What portion of payments to the lessor should be deferred on
December 31, 2019?
Answer: 100000 

Question 36
Which statement is true regarding initial direct costs incurred by the lessor?
Select one:
In an operating lease, initial direct costs incurred by the lessor are deferred and allocated over the lease term
In a direct financing lease, initial direct costs are added to the net investment in the lease
All of these statements are correct


In a sales type lease, initial direct costs are expensed as component of cost of goods sold

All of these statements are correct
Question 37
Instruction:
On July 1, 2020, Hutch Company leased equipment to Elder Company for a one-year period expiring June 30,
2021 for P60,000 a month. On July 1, 2021, Hutch Company leased this piece of equipment to Toil Company for a
three-year period expiring June 30, 2024 for P75,000 a month. The original cost of the equipment was
P4,800,000. The equipment, which has been continually on lease since July 1, 2017, is being depreciated on a
straight-line basis over an eight-year period with no residual value. What is the amount of net rental income
that would be reported by Hutch Company for the year ended December 31, 2021?
Answer: 210000 
Question 38
D. Sum of absolute amount of lease payments and guaranteed residual value
Select one:
Present value of lease payments
Sum of absolute amount of lease payments and guaranteed residual value


Absolute amount of lease payments
Present value of lease payments plus present value of unguaranteed residual value

Under a sales type lease, what is the meaning of gross investment in the lease?

Sum of absolute amount of lease payments and guaranteed residual value
Question 39
Instruction:
On January 1, 2020, Glen Company leased a building to Dix Company for a ten-year term at an annual rental of
P500,000.At inception of the lease, Glen Company received P2,000,000 covering the first two years’ rent of
P1,000,000 and a security deposit of P1,000,000.This deposit will not be returned to Dix Company upon expiration
of the lease but will be applied to payment of rent for the last two years of the lease. What amount should be
reported as current liability in the December 31, 2020 statement of financial position?
Answer: 500000 
Question 40
Refundable security deposit on the books of the lessor is recognized as
Select one:
Receivable
Rent income
Unearned income
Payable


Payable
Question 41
In an operating lease that is recorded by the lessee, the equal monthly rental payments should be
Select one:
Recorded as a rental expense


Allocated between reduction in lease liability and interest expense
Recorded as rental income
Recorded as reduction of right of use asset

Recorded as a rental expense
Question 42
The classification of a lease as either operating or finance lease is based on
Select one:
The lease payments being at least 50% of fair value
The length of the lease
The transfer of the risks and rewards of ownership


The economic life of the underlying asset

The transfer of the risks and rewards of ownership
Question 43
Instruction:
Answer: 648000 

Question 44
Instruction:
Conn Company owns an office building and normally charges tenants P3,000 per square meter per year for
office space. Because the occupancy rate is low, Conn Company agreed to lease 1,000 square meters to
Hanson Company at P1,200 per square meter for the first year of a three-year operating lease. Rent for the
remaining years will be at the P3,000 rate. Hanson Company moved into the building on January 1, 2020, and
paid the first year’s rent in advance. What amount of rental revenue should be reported in the income
statement for the year ended September 30, 2020?
Answer: 1800000 
Question 45
Instruction:
Answer: 500000 

Question 46
Instruction:
Answer: 2550000 
Question 47
Which is the correct accounting treatment for a finance lease in the accounts of a lessor
Select one:
Treat as a noncurrent asset equal to net investment in lease and recognize all finance payments in income statement
Treat as a receivable equal to gross amount receivable on lease and recognized finance payments in cash by reducing debt
Treat as a receivable equal to net investment in the lease and recognize finance payments by reducing debt and taking interest

to income statement
Treat as a receivable equal to net investment in the lease and recognize finance payments in cash by reduction of debt

Treat as a receivable equal to net investment in the lease and recognize finance payments by reducing debt and taking interest to income statement
Question 48
Instruction:
Answer: 6600000 
Question 49
Instruction:
On January 1, 2020, Glen Company leased a building to Dix Company for a ten-year term at an annual rental of
P500,000.At inception of the lease, Glen Company received P2,000,000 covering the first two years’ rent of
P1,000,000 and a security deposit of P1,000,000.This deposit will not be returned to Dix Company upon expiration
of the lease but will be applied to payment of rent for the last two years of the lease. What amount should be
reported as noncurrent liability in the December 31, 2020 statement of financial position?
Answer: 1000000 

Question 50
Instruction:
Answer: 780000 
Question 51
Instruction:
Answer: 500000 

Question 52
Which statement is correct regarding the lease capitalization criteria?
Select one:
The lease transfers ownership to the lessor
The present value of lease payments are at least 90% of fair value of asset
The lease contains a purchase option


The lease term is equal to at least 75% of the economic life of the underlying asset.

The present value of lease payments are at least 90% of fair value of asset
Question 53
Instruction:
Answer: 1279200 

Question 54
Instruction:
Answer: 400000 
Question 55
Instruction:
Answer: 600000 

Question 56
Net investment a sales type lease is equal to
Select one:
Gross investment in the lease less unearned finance income


Cost of the underlying asset
The lease payments
The lease payments less unguaranteed residual value

Gross investment in the lease less unearned finance income
Question 57
Instruction:
On Oct. 1, 2019, Denki leased an equipment for 2 years, with a monthly rental of 3,000. As an inducement to the
lessee, the lessor permitted him to use the equipment for free in first three months. What amount should be
reported as rent expense at the December 31, 2020.
Answer: 3000 

Question 58
Instruction:
Answer: 10125000 
Question 59
Which statement characterizes a sales type lease?
Select one:
The lessor recognizes only interest revenue over the lease term
The lessor recognizes only interest revenue over the useful life of the asset
The lessor recognizes a dealer profit at lease inception and interest revenue over the lease term

The lessor recognizes a dealer profit at lease inception and interest revenue over the useful life of the asset

The lessor recognizes a dealer profit at lease inception and interest revenue over the lease term
Question 60
The primary difference between a direct financing lease and sales type lease is the
Select one:
Depreciation recorded each year by the lessor
Allocation of initial direct costs incurred by the lessor over the lease term

Manner in which rental collections are recorded as rental income
Recognition of the manufacturer or dealer profit at the inception of the lease

Recognition of the manufacturer or dealer profit at the inception of the lease
Question 61
Which statement characterizes an operating lease?
Select one:
The lessor records depreciation and lease revenue


The lessee records a lease obligation
The lessee records depreciation and interest.
The lessor transfers title of the underlying asset to the lessee for the duration of the lease term

The lessor records depreciation and lease revenue
Question 62
Lessors shall recognize asset held under a finance lease a receivable at an amount equal to the
Select one:
Gross rentals
Residual value, whether guaranteed or unguaranteed
Net investment in the lease
Gross investment in the lease



Net investment in the lease
Question 63
Instruction:
Wall Company leased an office to Fox Company for a five-year term beginning January 1, 2020.Under the terms
of the operating lease, rent for the first year is P800,000 and rent for years 2 through 5 is P1,250,000 per annum.
However, as an inducement to enter the lease, Wall Company granted Fox Company the first six months of the
lease rent-free. What amount should be reported as rental income for 2020?
Answer: 1080000 
Question 64
When should a lessor recognize income on a nonrefundable lease bonus paid by a lessee?
Select one:
At the inception of the lease
When received
Over the lease term


At the lease expiration

Over the lease term
Question 65
Instruction:
Answer: 1850400 

Question 66
Instruction:
Answer: 204492 
Question 67
Instruction:
Answer: 154000 

Question 68
One of the four determinative criteria for a finance lease specifies that the lease term be equal to or greater
than (US GAAP)
Select one:
75% of the economic life of the asset
The economic life of the underlying asset



Question 69
Instruction:
Answer: 453400 

Question 70
Instruction:
Answer: 5875000 
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Post Assessment Long Quiz 2 Attempt Review

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Post Assessment Long Quiz 2 Attempt Review

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Started on Wednesday, 10 August 2022, 1:46 PM

Completed on Wednesday, 10 August 2022, 4:46 PM

Time taken 3 hours

Grade 53.00 out of 70.00 (76%)

Incorrect Mark 0 out of 1

An outright expense by the lessor

Your answer is incorrect.

Correct Mark 1 out of 1

Please follow the sample answer: 1000000

The correct answer is: 604492

Incorrect Mark 0 out of 1

Please follow the sample answer: 1000000

The correct answer is: 1732500

Correct Mark 1 out of 1

Net investment in a direct financing lease is equal to

Cost of the asset plus guaranteed residual value

Cost of the asset minus guaranteed residual value

Cost of the asset

Your answer is correct.

Correct Mark 1 out of 1

Please follow the sample answer: 1000000

The correct answer is: 900000

Correct Mark 1 out of 1

Which of the following statements is true about low value lease?

All of these statements are true about low value lease.

Your answer is correct.

Incorrect Mark 0 out of 1

Gross investment in the lease is equal to

The lease payments under a finance lease of the lessor

Present value of lease payments under a finance lease of the lessor

Your answer is incorrect.

Correct Mark 1 out of 1

Please follow the sample answer: 1000000

The correct answer is: 1000000

Correct Mark 1 out of 1

Please follow the sample answer: 1000000

The correct answer is: 391800

Correct Mark 1 out of 1

Please follow the sample answer: 1000000

The correct answer is: 130000

Correct Mark 1 out of 1

Sum of units basis

Diminishing balance basis

Straight line basis over the lease term

Your answer is correct.

Incorrect Mark 0 out of 1

Please follow the sample answer: 1000000

The correct answer is: 6000000

Correct Mark 1 out of 1

Please follow the sample answer: 1000000

The correct answer is: 800000

Correct Mark 1 out of 1

Please follow the sample answer: 1000000

The correct answer is: 630000

Correct Mark 1 out of 1

In increasing amounts during the term of the lease

In constant amounts during the term of the lease

In decreasing amounts during the term of the lease

Your answer is correct.

Incorrect Mark 0 out of 1

Be recognized on a straight-line basis over the lease term

Only be recognized at the end of the lease term

Not be recognized separately from finance income