ACCT 3342 CH 20 & 21

What impact does a bargain purchase option have on the present value of the minimum lease payments computed by the lessee?

The lessee must increase the present value of the minimum lease payments by the present value of the option price.

Classifications of a lease by the lessee are…?

Operating and finance leases.

What do lease payments include?

Fixed payments, variable payments based on index, a bargain purchase option, and a guaranteed residual value.

When computing amortization of a leased assets where there is no bargain purchase option, the lessee should subtract…

No residual value and depreciate over the term of the lease.

When computing the present value of lease payments, the lessee should…

Use the implicit rate of the lessor, assuming that the implicit rate is known to the lessee.

A lessee with a finance lease containing a bargain purchase option should depreciate the leased asset over the…

Asset’s remaining economic life.

Which of the following would be included in a lease receivable account?

Guaranteed residual value, unguaranteed residual value, and rental payments.

In an operating lease, the lessee records

Lease expense.

In a finance lease, the lessee records

Amortization and interest expense

When lessors account for residual values related to leased assets, they…

Include the residual value in the receivable measurement because it is assumed the residual value will be realized.

For a sales-type lease,

The gross profit will be the same whether the residual value is guaranteed or not.

What is not accounted for as a change in accounting principle?

A change to a different method of depreciation for plant assets.

What is NOT a retrospective-type accounting change?

Sum-of-the-years’-digits method to straight-line method in depreciation.

Which of the following is accounted for as a change in accounting principle?

A change in inventory valuation from average cost to FIFO

What is disclosure is required for a change from sum-of-the-years-digits to straight-line deprecation methods?

Precomputation of current and future' year’s depreciation.

Which of the following disclosures are required for a change from LIFO to FIFO?

The cumulative effect on prior years, net of tax, in the current retained earnings, the justification for the change, and restated prior year income statements.

Which type of accounting change should always be accounted for in current and future periods?

Change in accounting estimate

An example of a correction of effort in previously issues financial statements is a change…

from the cash basis of accounting to the accrual basis of accounting.

The estimated life of a building that has depreciated for 30 years of an originally estimated life of 50 years has been revises to a remaining life of 10 years. What should an accountant do based off this information?

Depreciate the remaining book value of the remaining life of the asset.

What would be described as a change in reporting entity?

Changing the companies included in combined financial statements.