Question 1

What is a transition provision option for lessees according to AASB 16?

Accepted Answer

A)   Apply AASB retrospectively to each prior reporting period presented
B)   Apply the prospective 'cumulative catch-up' approach
C)   Both A and B are acceptable transition provision options
D)   Neither A nor B are considered transition provision options

Question 2

How is the lessee to measure the lease liability after the commencement date.

Accepted Answer

A)   Increasing the carrying amount to reﬂect interest on the lease liability
B)   Reducing the carrying amount to reﬂect the lease payment made
C)   Remeasuring the carrying amount to reﬂect any reassessment or lease modiﬁcations
D)   All the above are measurement requirements

Question 3

What is the result of the on-balance sheet treatment of a lease?

Accepted Answer

A)   Increased return on total assets and decreased debt ratio
B)   Increased earnings per share and decreased debt ratio
C)   Increased return on total assets and increased debt ratio
D)   Decreased return on total assets and increased debt ratio

Question 4

What additional issues are addressed by leases entered into by manufacturers or dealers?

Accepted Answer

A)   Presentation and disclosure
B)   Measurement and recognition
C)   Classification and recognition
D)   Disclosure and measurement

Question 5

What is a requirement listed in AASB 16 that addresses the exception of all leases to be listed on the balance sheet?

Accepted Answer

A)   A right-of-use asset must be recognised
B)   A lease liability must be recognised
C)   Underlying asset is of low value
D)   No exceptions are listed in AASB 16

Question 6

Operating leases are commonly referred to as ________ while capital leases are also known as ________ leases.

Accepted Answer

A)   on-balance sheet; off-balance sheet
B)   finance; on-balance sheet
C)   off-balance sheet; on-balance sheet
D)   on-balance sheet; finance

Question 7

Tomfoolery Ltd enters into a sale-and-leaseback arrangement for an aircraft it owns.The resulting lease is classified as a finance lease.The details are as follows:
  Carrying amount of asset $50000 Proceeds from sale of asset $60000 Annual lease payment amount $8000\begin{array} { l l } 	ext { Carrying amount of asset } & \$ 50000 \	ext { Proceeds from sale of asset } & \$ 60000 \	ext { Annual lease payment amount } & \$ 8000\end{array} Carrying amount of asset  Proceeds from sale of asset  Annual lease payment amount ​$50000$60000$8000​ 
According to AASB 117,Tomfoolery should make which of the following entries to record the sale:

Accepted Answer

A)    Dr Cash at bank $60000 Cr Aircraft $50000 Cr Deferred gain on sale $10000Dr Aircraft under lease$60000 Crlease liability $60000\begin{array}{ll}	ext { Dr Cash at bank } & \$ 60000 \	ext { Cr Aircraft } && \$ 50000 \	ext { Cr Deferred gain on sale } && \$ 10000\	ext {Dr Aircraft under lease}&\$ 60000\	ext { Crlease liability }&&\$ 60000\end{array} Dr Cash at bank  Cr Aircraft  Cr Deferred gain on sale Dr Aircraft under lease Crlease liability ​$60000$60000​$50000$10000$60000​  
B)    Dr Air craft $60000 Cr Cash at bank $50000 Cr Deferred gain on sale $10000\begin{array} { l l l } 	ext { Dr Air craft } & \$ 60000 \	ext { Cr Cash at bank } & & \$ 50000 \	ext { Cr Deferred gain on sale } & & \$ 10000\end{array} Dr Air craft  Cr Cash at bank  Cr Deferred gain on sale ​$60000​$50000$10000​  
C)    Dr Cash at bank $60000 Cr Air craft $50000 Cr Gain on sale income $10000 Dr Air craft under lease $60000 Cr Lease liability $60000\begin{array} { l l l } 	ext {  Dr Cash at bank } & \$ 60000 & \	ext { Cr Air craft } & & \$ 50000 \	ext { Cr Gain on sale income } & & \$ 10000 \	ext { Dr Air craft under lease } & \$ 60000 & \	ext { Cr Lease liability } & & \$ 60000\end{array} Dr Cash at bank  Cr Air craft  Cr Gain on sale income  Dr Air craft under lease  Cr Lease liability ​$60000$60000​$50000$10000$60000​  
D)   No entry is required as Tomfoolery will still own the asset in an economic sense

Question 8

What is defined as the non-cancellable period for which the lessee has a right to use an underlying asset?

Accepted Answer

A)   Lease term
B)   Lessor's rights
C)   Lessee's rights
D)   Bargain-purchase window

Question 9

Which type of lease is not applicable to AASB 16 'Leases'?

Accepted Answer

A)   Leases to explore for or use mineral, oil, or natural gas
B)   Service concession arrangements within the scope of Interpretation 12 'Service Concessions Arrangements'
C)   Rights held by a lessee under licensing agreements within the scope of AASB 138 'Intangible Assets'
D)   All of the above are excluded from AASB 16 'Leases'

Question 10

A typical lease agreement will always set out all of the following except:

Accepted Answer

A)   who is responsible for the payment of maintenance and repair costs, insurance and taxes
B)   that the lease is non-cancellable by either party
C)   the amount and timing of the lease (rental)  payments
D)   the period of the lease

Question 11

Managers will often have strong incentives to favour operating leases over finance leases.This is because:

Accepted Answer

A)   operating leases are recorded on the balance sheet. This results in an increased debt ratio and a lower return on total assets
B)   finance leases are recorded on the balance sheet. This results in a decreased debt ratio and a lower return on total assets
C)   finance leases are recorded on the balance sheet. This results in an increased debt ratio and a lower return on total assets
D)   None of the above. Managers do not prefer operating leases

Question 12

Which of the following is a factor considered by the lessor at the commencement date regarding the possible termination of a lease?

Accepted Answer

A)   The importance of the underlying asset to the lessee's operation
B)   The amount of any fixed payments
C)   The importance of the underlying asset to the lessor's lease revenue
D)   Purchase options that are significantly above market rates

Question 13

What is required in AASB 16 that are critical to the implementation of the standard?

Accepted Answer

A)   Identifying whether the contract contains a lease
B)   Separating the components of the contract
C)   Both A and B
D)   Neither A nor B

Exam 11: Accounting for Leases

Managers will often have strong incentives to favour operating leases over finance leases.This is because:

Correct Answer
verified

Correct Answer
verified

How is the lessee to measure the lease liability after the commencement date.

Correct Answer
verified

What additional issues are addressed by leases entered into by manufacturers or dealers?

Correct Answer
verified

What is required in AASB 16 that are critical to the implementation of the standard?

Correct Answer
verified

A typical lease agreement will always set out all of the following except:

Correct Answer
verified

What is defined as the non-cancellable period for which the lessee has a right to use an underlying asset?

Correct Answer
verified

What is the result of the on-balance sheet treatment of a lease?

Correct Answer
verified

What is a transition provision option for lessees according to AASB 16?

Correct Answer
verified

What is a requirement listed in AASB 16 that addresses the exception of all leases to be listed on the balance sheet?

Correct Answer
verified

Operating leases are commonly referred to as while capital leases are also known as leases.

Correct Answer
verified

Which type of lease is not applicable to AASB 16 'Leases'?

Correct Answer
verified

Which of the following is a factor considered by the lessor at the commencement date regarding the possible termination of a lease?

Correct Answer
verified

Exam 11: Accounting for Leases

Managers will often have strong incentives to favour operating leases over finance leases.This is because:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

How is the lessee to measure the lease liability after the commencement date.

Correct AnswerverifiedShow Answer

What additional issues are addressed by leases entered into by manufacturers or dealers?

Correct AnswerverifiedShow Answer

What is required in AASB 16 that are critical to the implementation of the standard?

Correct AnswerverifiedShow Answer

A typical lease agreement will always set out all of the following except:

Correct AnswerverifiedShow Answer

What is defined as the non-cancellable period for which the lessee has a right to use an underlying asset?

Correct AnswerverifiedShow Answer

What is the result of the on-balance sheet treatment of a lease?

Correct AnswerverifiedShow Answer

What is a transition provision option for lessees according to AASB 16?

Correct AnswerverifiedShow Answer

What is a requirement listed in AASB 16 that addresses the exception of all leases to be listed on the balance sheet?

Correct AnswerverifiedShow Answer

Operating leases are commonly referred to as ________ while capital leases are also known as ________ leases.

Correct AnswerverifiedShow Answer

Which type of lease is not applicable to AASB 16 'Leases'?

Correct AnswerverifiedShow Answer

Which of the following is a factor considered by the lessor at the commencement date regarding the possible termination of a lease?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Operating leases are commonly referred to as while capital leases are also known as leases.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified