1.

Which of the following is NOT a type of lease recognized in accounting

standards?
a) Operating lease
b) Finance lease
c) Sales lease
d) Short-term lease
Answers:
1. c) Sales lease

2. In a finance lease, which entity retains ownership of the leased asset?

a) Lessee
b) Lessor
c) Both lessee and lessor jointly
d) Government authority
Answers:
2. a) Lessee

3. What is the primary criterion used to determine whether a lease is a

finance lease or an operating lease?
a) Lease term
b) Present value of lease payments
c) Transfer of ownership
d) Residual value of the asset
Answers:
3. b) Present value of lease payments

4. How are lease payments typically recognized in an operating lease?

a) Straight-line over the lease term
b) Accelerated basis
 c) Recognized fully at the beginning of the lease term
d) Recognized fully at the end of the lease term
Answers:
4. a) Straight-line over the lease term

5. Which financial statement includes the recognized right-of-use asset and

lease liability for a lessee in a finance lease?
a) Income statement
b) Balance sheet
c) Cash flow statement
d) Statement of changes in equity
Answers:
5. b) Balance sheet

6. How does a lessee calculate the right-of-use asset in a finance lease?

a) Equal to the present value of lease payments
b) Equal to the fair value of the leased asset
c) Equal to the residual value of the leased asset
d) Equal to the future value of lease payments
Answers:
6. a) Equal to the present value of lease payments
7. Under which lease type does the lessee record depreciation expense on
the right-of-use asset?
a) Operating lease
b) Short-term lease
c) Sales-type lease
d) Finance lease
Answers:
7. d) Finance lease
1. The person who undertake an agreement, conveys to another person the
right to use in return for rent, an assest for an agreed period of time

(a) Lessor

(b) Lessee

(c) Both

(d) None of the above

Answer (a) Lessor

2. The person who under an agreement , obtains from another person the
right to use, in return for rent, an assest for an agreed period of time.

(a) Lessor

(b) Lessee

(c) Both

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(d) None of the above

Answer (b) Lessee

3. Accounting standard for lease is

(a) As 17
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(b) As 18

(c) As 19

(d) As 20

Answer (c) As 19
4. There are twon parties involved in a lease agreement namely

(a) Lessor and lessee

(b) Indemnifier and surety

(c) Buyer and seller

(d) Bailor and bailee

Answer (a) Lessor and lessee

5. The amout for which an assest could be exchanged or a liability settled
between knowledgeable, willing parties in an arm length transaction in
termed as

(a) Invoice value

(b) Market value

(c) Fire value

(d) Dual value

Answer (c) Fire value

6. The estimated fire value of the assets at the end of the lease term is
known as

(a) Residual value

(b) Invoice value

(c) Dual value

(d) Market value

Answer (a) Residual value

7. As 19 classifies lease in to how many types?

(a) 2

(b) 1

(c) 3

(d) 4

Answer (a) 2
8. Operating lease is a

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(a) Revocable contract

(b) Non revocable contract

(c) Operating contract

(d) None of the above

Answer (a) Revocable contract

9. Which lease transfer substantially all the risk and rewards incident to
ownership of an asset?

(a) Operating lease

(b) Finance lease

(c) Both

(d) None of the above

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Answer (b) Finance lease
10. The different between the lessor’s gross investment in the lease and its
present value is called as

(a) Finance income

(b) Nonfinancial income

(c) Unearned finance income

(d) None of the above

Answer (c) Unearned finance income

11. The expected fire value of the leasehold property at the end of the term
included in the minimum lease payment is termed as

(a) Unguaranteed residual value

(b) Guaranteed residual value

(c) Both

(d) None of the above

Answer (a) Unguaranteed residual value

12. A portion of the lease payment that is not fixed in amount but is based
on a factor other than just the passage of time is termed as

(a) House rent

(b) Outstanding rent

(c) Contingent rent

(d) None of the above

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Answer (c) Contingent rent
13. Financial lease is

(a) Non revocable contract

(b) Revocable contract

(c) Contingent contract

(d) None of the above

Answer (a) Non revocable contract

14. In which types of lease expenses like maintenance, repair, and taxes are
born by the lessor

(a) Operating lease

(b) Financial lease

(c) Both

(d) None of the above

Answer (a) Operating lease

15. In financial lease the risk of obsolescence is taken by the

(a) Lessor

(b) Lessee
(c) Both

(d) None of the above

Answer (b) Lessee

1. Which accounting standard primarily governs the treatment of leases for
lessees and lessors?
a) IFRS 16
b) ASC 842
c) IAS 17
d) GASB 87
Answers:
1. a) IFRS 16

2. How does a finance lease differ from an operating lease under IFRS and
ASC accounting standards?
a) Finance leases recognize the leased asset and liability on the balance
sheet, while operating leases do not.
b) Finance leases transfer ownership of the asset to the lessee by the end
of the lease term, while operating leases do not.
c) Finance leases always have a shorter term than operating leases.
d) Operating leases have higher lease payments than finance leases.
Answers:
2. a) Finance leases recognize the leased asset and liability on the balance
sheet, while operating leases do not.

3. Under IFRS 16 and ASC 842, what criteria are used to determine if a lease
is a finance lease or an operating lease?
a) The economic life of the leased asset
b) The transfer of ownership of the asset
c) The present value of lease payments and the right to control the use of
the asset
d) The residual value of the leased asset
Answers:
3. c) The present value of lease payments and the right to control the use of
the asset
4. How are lease liabilities initially measured under both IFRS 16 and ASC
842?
a) At the present value of lease payments over the lease term
b) At the fair value of the underlying asset
c) At the future value of lease payments
d) At the residual value of the leased asset
Answers:
4. a) At the present value of lease payments over the lease term

5. What is the primary objective of the lease accounting standards (IFRS 16

and ASC 842)?
a) To eliminate all types of leases and encourage outright purchases of
assets
b) To bring all leases on-balance sheet for transparency and comparability
c) To allow companies to hide long-term liabilities by using operating
leases
d) To provide tax incentives for leasing rather than buying assets
Answers:
5. b) To bring all leases on-balance sheet for transparency and comparability

6. Which financial statement(s) reflect the impact of a lessee's right-of-use

asset and lease liability for a finance lease?
a) Income statement only
b) Cash flow statement only
c) Balance sheet and income statement
d) Statement of changes in equity only
Answers:
6. c) Balance sheet and income statement
1. Under IFRS 16 and ASC 842, which of the following is NOT a criterion for a
lease to be classified as a finance lease?
a) The lease transfers ownership of the asset to the lessee by the end of
the lease term.
b) The lease term covers a major part of the asset's economic life.
c) The present value of lease payments equals or exceeds substantially all
of the fair value of the asset.
d) The lease includes a purchase option at the end of the term for a
nominal price.
Answers:
1. a) The lease transfers ownership of the asset to the lessee by the end of
the lease term.

2. Which accounting standard significantly changed the treatment of leases

by requiring most leases to be recognized on the lessee's balance sheet?
a) IFRS 9
b) IFRS 15
c) IFRS 16
d) IFRS 13
Answers:
2. c) IFRS 16
3. In a finance lease, the lessee typically records interest expense and
depreciation expense in its income statement using which methods?
a) Straight-line for both interest and depreciation expense
b) Straight-line for interest and reducing balance for depreciation expense
c) Reducing balance for both interest and depreciation expense
d) Reducing balance for interest and straight-line for depreciation expense
Answers:
3. d) Reducing balance for interest and straight-line for depreciation
expense
4. How does a lessee account for initial direct costs incurred in obtaining a
lease under both IFRS 16 and ASC 842?
a) Amortized over the lease term
b) Expensed immediately when incurred
c) Recognized as a part of the lease liability
d) Ignored and not recognized in accounting
Answers:
4. a) Amortized over the lease term

5. When is a lease modification accounted for as a separate lease under IFRS

16 and ASC 842?
a) When the modification increases the scope of the lease
b) When the modification extends the lease term
c) When the modification decreases the lease payments
d) When the modification is insignificant and doesn't affect accounting
Answers:
5. a) When the modification increases the scope of the lease

6. How are short-term leases generally treated under IFRS 16 and ASC 842?
a) Recognized on the balance sheet
b) Recognized as a contingent liability
c) Excluded from recognizing lease assets and liabilities
d) Treated as finance leases regardless of the term
Answers:
6. c) Excluded from recognizing lease assets and liabilities

7. What is the primary accounting treatment difference between operating

leases and finance leases for lessees?
a) Recognition of assets and liabilities on the balance sheet
b) Recognition of expenses in the income statement
 c) Recognition of cash flows in the cash flow statement
d) Recognition of equity in the statement of changes in equity
Answers:
7. a) Recognition of assets and liabilities on the balance sheet

8. Under IFRS 16 and ASC 842, the right-of-use asset is initially measured at:
a) Fair value of the underlying asset
b) Present value of lease payments
c) Cost incurred by the lessor
d) Future value of lease payments
Answers:
8. b) Present value of lease payments

9. Which financial statement reflects the impact of lease liabilities for a

lessee under IFRS 16 and ASC 842?
a) Income statement
b) Balance sheet
c) Statement of cash flows
d) Statement of changes in equity
Answers:
9. b) Balance sheet
10. What is the purpose of discounting lease payments under IFRS 16 and
ASC 842?
a) To reduce the lease liability to its present value
b) To increase the lease liability for future value considerations
c) To overstate the lease liability for accounting purposes
d) To avoid recognizing the lease liability
Answers:
10. a) To reduce the lease liability to its present value