ACCT 301b FINAL

Which of the following is a criterion for a lease to be classied as a nance lease in the books of a lessee?

The lease contains a bargain purchase option.

In computing lease payments, the amount to be recovered by the lessor is the:

fair market value of the leased asset less the present value of the asset's residual value

The computation of the lessee's capitalized amount is the sum of the:

present value of expected probable payments (if the expected residual value is lower

than the guaranteed residual value).

Lease 1 does not contain a bargain purchase option, but the lease term is equal to 90 percent of the estimated economic life of the leased property. Lease 2 does not transfer ownership of the property to the lessee by the end of the lease term, but the lease term is equal to 75 percent of the estimated economic life of the leased property. How should the lessee classify these leases?

Lease 1: Finance, Lease 2: Finance

In computing the present value of the minimum lease payments, the lessee should

use the lessor’s implicit interest rate if it is practicable and otherwise use its

incremental borrowing rate.

Which of the following transactions would be reported in both the investing and financing

sections?

Ainsworth Company issued a note payable and used the proceeds to purchase

equipment.

In a statement of cash flows, proceeds from issuing equity instruments should be classified as cash inflows from

financing activities

Which method adjusts net income to net cash flows from operating activities?

indirect

If a plant asset is sold for cash and a loss results, which sections are affected in the statement of cash flows under the indirect method?

operating and investing

The primary purpose of the statement of cash ows is to provide information

about the cash receipts and cash payments of an entity during a period.