ACC 305 Exam Paper

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ACC 305 Week 11 Final Exam Purchase this exam here: TRUE-FALSE—Conceptual 1. Leasing equipment reduces the risk of obsolescence to the lessee, and passes the risk of residual value to the lessor. 2. The FASB agrees with the capitalization approach and requires companies to capitalize all long-term leases. 3. A lease that contains a purchase option must be capitalized by the lessee. 4. Executory costs should be excluded by the lessee in computing the present value of the minimum lease payments. 5. A capitalized leased asset is always depreciated over the term of the lease by the lessee. 6. A lessee records interest expense in both a…show more content…
Less costly financing c. 100% financing at fixed rates d. All of these 23. Which of the following best describes current practice in accounting for leases? a. Leases are not capitalized. b. Leases similar to installment purchases are capitalized. c. All long-term leases are capitalized. d. All leases are capitalized. 24. While only certain leases are currently accounted for as a sale or purchase, there is theoretic justification for considering all leases to be sales or purchases. The principal reason that supports this idea is that a. all leases are generally for the economic life of the property and the residual value of the property at the end of the lease is minimal. b. at the end of the lease the property usually can be purchased by the lessee. c. a lease reflects the purchase or sale of a quantifiable right to the use of property. d. during the life of the lease the lessee can effectively treat the property as if it were owned by the lessee. S25. An essential element of a lease conveyance is that the a. lessor conveys less than his or her total interest in the property. b. lessee provides a sinking fund equal to one year's lease…show more content…
The present value of the minimum lease payments plus the present value of the unguaranteed residual value. 45. For a sales-type lease, a. the sales price includes the present value of the unguaranteed residual value. b. the present value of the guaranteed residual value is deducted to determine the cost of goods sold. c. the gross profit will be the same whether the residual value is guaranteed or unguaranteed. d. none of these. 46. Which of the following statements is correct? a. In a direct-financing lease, initial direct costs are added to the net investment in the lease. b. In a sales-type lease, initial direct costs are expensed in the year of incurrence. c. For operating leases, initial direct costs are deferred and allocated over the lease term. d. All of these. 47. The Lease Liability account should be disclosed as a. all current liabilities. b. all noncurrent liabilities. c. current portions in current liabilities and the remainder in noncurrent liabilities. d. deferred credits. 48. To avoid leased asset capitalization, companies can devise lease agreements that fail to satisfy any of the four leasing criteria. Which of the following is not one of the ways to accomplish this

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