Reference no: EM131747858

A lessor appropriately capitalizes the lease of an asset with fair value of $100,000 and cost of $70,000. The lease term is 5 years and the annual lease payment is $24,000. By what amount will the lessor's pretax income increase over the 5 year lease term, as a result of this lease?
a. 30,000
b. 80,000
c. 50,000
d. 40,000
e. 20,000

A lease capitalized by both parties is signed (inception) on 1/1/x4. The lease term is 10 years. The lease requires annual payments each January 1 starting at inception. Choose the correct statement about the JE to be recorded by the lessee on 12/31/x5.
a. there is no JE to be recorded
b. cash is credited
c. lease liability is credited
d. lease liability is debited
e. depreciation is not recorded because the lessor is the legal owner

The inception of a capitalized lease is 1/1/x4 and the term is 4 years. The lease payments are due each Jan. 1 starting at inception. The lease payment is $12,000. The asset under lease is expected to be worth $4,000 at the end of the lease term. The lessor's implicit interest rate is 8%. Compute the lessor's net lease receivable immediately after receiving the first payment on 1/1/x4.
a. 33,865
b. 31,924
c. 29,564
d. 34,645
e. 45,865

A bargain purchase option in a lease
a. causes the lease to be an operating lease
b. is included in the net lease receivable at present value
c. causes only the lessee to capitalize the lease
d. causes the lessor to accept a lower interest rate
e. is defined as any purchase option with a 5% or more implied discount