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    Arpia Lovely Rose Quiz Chapter 7 Leases Part 1

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    Lovely Arpia
    This document contains a 10 question quiz on leases based on Philippine Financial Reporting Standards (PFRS) 16. The questions cover topics such as the criteria for determining whether a contract contains a lease, accounting treatment for leases by lessors and lessees, presentation of lease liabilities and right-of-use assets in financial statements, calculation of depreciation expense and interest expense related to leased assets, and treatment of lease payments and bonuses under the practical expedient for low value leases. The document provides the questions, multiple choice answers, and explanatory solutions for each question.

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    Arpia Lovely Rose Quiz Chapter 7 Leases Part 1

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    Lovely Arpia
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    This document contains a 10 question quiz on leases based on Philippine Financial Reporting Standards (PFRS) 16. The questions cover topics such as the criteria for determining whether a contract contains a lease, accounting treatment for leases by lessors and lessees, presentation of lease liabilities and right-of-use assets in financial statements, calculation of depreciation expense and interest expense related to leased assets, and treatment of lease payments and bonuses under the practical expedient for low value leases. The document provides the questions, multiple choice answers, and explanatory solutions for each question.

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    This document contains a 10 question quiz on leases based on Philippine Financial Reporting Standards (PFRS) 16. The questions cover topics such as the criteria for determining whether a contract contains a lease, accounting treatment for leases by lessors and lessees, presentation of lease liabilities and right-of-use assets in financial statements, calculation of depreciation expense and interest expense related to leased assets, and treatment of lease payments and bonuses under the practical expedient for low value leases. The document provides the questions, multiple choice answers, and explanatory solutions for each question.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    1K views3 pages

    Arpia Lovely Rose Quiz Chapter 7 Leases Part 1

    Uploaded by

    Lovely Arpia
    This document contains a 10 question quiz on leases based on Philippine Financial Reporting Standards (PFRS) 16. The questions cover topics such as the criteria for determining whether a contract contains a lease, accounting treatment for leases by lessors and lessees, presentation of lease liabilities and right-of-use assets in financial statements, calculation of depreciation expense and interest expense related to leased assets, and treatment of lease payments and bonuses under the practical expedient for low value leases. The document provides the questions, multiple choice answers, and explanatory solutions for each question.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 3

    Page | 1

    Chapter 7
    Leases Part 1

    NAME: Lovely Rose A. Arpia Date:


    Professor: Sir Reyroso Section: BSA 2 Score:

    QUIZ:
    1. Entity A (customer) enters into a contract with Entity B (supplier) for the use of a data
    processing equipment. According to the contract, Entity A shall operate the equipment only in
    accordance with the standard operating procedures stated in the accompanying user’s manual.
    In assessing the existence of a lease, does Entity A have the right to direct the use of the asset?
    a. No, because the asset’s use is restricted.
    b. Yes, because Entity A has the right to direct how and for what purpose the asset is used.
    c. Yes, because the asset’s use is predetermined and Entity B is precluded from changing that
    predetermined use.
    d. Maybe yes, maybe no, but exactly I don’t know.

    2. Which of the following is not one of the criteria when determining whether a contract is or
    contains a lease?
    a. Identified asset
    b. Identified liability
    c. Right to obtain substantially all of the economic benefits from use of an identified asset
    throughout the period of use
    d. Right to direct the use of the identified asset throughout the period of use

    3. Which of the following statements is correct regarding the accounting for leases?
    a. The lessor depreciates the leased asset under a finance lease.
    b. The lessee depreciates the leased asset under a “short-term” or a “low-valued asset” lease.
    c. When discounting lease payments the lessor and the lessee use the interest rate implicit in
    the lease.
    d. An entity can never be both a lessor and a lessee of a same leased asset.

    4. According to PFRS 16, lease liabilities are presented in the lessee’s statement of financial position
    a. separately from the other liabilities of the lessee.
    b. together with other liabilities, with disclosure of the line items that include the lease
    liabilities.
    c. a or b
    d. not presented in the lessee’s financial statements but only in the lessor’s financial statements

    5. According to PFRS 16, right-of-use assets are presented in the lessee’s statement of financial
    position
    a. separately from the other assets of the lessee.
    b. together with other assets as if they were owned, with disclosure of the line items that
    include the right-of-use assets.
    Page | 2

    c. a or b
    d. not presented in the lessee’s financial statements but only in the lessor’s financial statements

    6. On January 2, 20x9, Nori Mining Co. (lessee) entered into a 5-year lease for drilling equipment.
    Nori recognized a lease liability of ₱240,000 at the commencement date. This amount includes
    the ₱10,000 exercise price of a purchase option. At the end of the lease, Nori expects to exercise
    the purchase option. Nori estimates that the equipment's fair value will be ₱20,000 at the end of
    its 8-year life. Nori regularly uses straight-line depreciation on similar equipment. For the year
    ended December 31, 20x9, what amount should Nori recognize as depreciation expense on the
    leased asset?
    a. 48,000 b. 46,000 c. 30,000 d. 27,500

    (240,000 – 20K) ÷ 8 yrs. = 27,500

    7. In the long-term liabilities section of its balance sheet at December 31, 20x9, Mene Co. reported a
    lease liability of ₱75,000, net of current portion of ₱1,364. Payments of ₱9,000 were made on both
    January 2, 2x10, and January 2, 2x11. Mene's incremental borrowing rate on the date of the lease
    was 11% and the lessor's implicit rate, which was known to Mene, was 10%. In its December 31,
    2x10, balance sheet, what amount should Mene report as lease liability, net of current portion?
    a. 66,000 b. 73,500 c. 73,636 d. 74,250

    (75,000 + 10%) - 9,000 = 73,500

    8. Oak Co. leased equipment for its entire nine-year useful life, agreeing to pay ₱50,000 at the start
    of the lease term on December 31, 20x8, and ₱50,000 annually on each December 31 for the next
    eight years. The present value on December 31, 20x8, of the nine lease payments over the lease
    term, using the rate implicit in the lease which Oak knows to be 10%, was ₱316,500. The
    December 31, 20x8, present value of the lease payments using Oak's incremental borrowing rate
    of 12% was ₱298,500. Oak made a timely second lease payment. What amount should Oak report
    as lease liability in its December 31, 20x9, balance sheet?
    a. 350,000 b. 243,150 c. 228,320 d. 0

    316,500 - 50K = 266,500 lease liability balance after first payment


    266,500 x 10% = 26,650 interest expense
    50,000 - 26,650 = 23,350 principal reduction
    266,500 - 23,350 = 243,150 capital lease liability

    9. On January 2, 20x5, Marx Co. as lessee signed a five-year noncancelable equipment lease with
    annual payments of ₱200,000 beginning December 31, 20x5. The five lease payments have a
    present value of ₱758,000 at January 2, 20x5, based on interest of 10%. What amount should
    Marx report as interest expense for the year ended December 31, 20x5?
    a. 0 b. 48,000 c. 55,800 d. 75,800

    758,000 x 10% = 75,800


    Page | 3

    10. On January 1, 20x1, ABC Co. enters into a 4-year lease of office equipment. The rent in 20x1 is
    ₱10,000 and shall increase by 10% annually starting on January 1, 20x2. Rentals are payable at
    the end of each year. ABC Co. pays the lessor a lease bonus of ₱5,000 on January 1, 20x1. ABC
    Co. opts to use the practical expedient allowed under PFRS 16 for leases of low value assets.
    How much is the lease expense in 20x1?
    a. 10,000 b. 11,000 c. 11,603 d. 12,853

    Annual rent 10% interest


    year 1 10,000
    year 2 11,000
    year 3 12,100
    year 4 13,310
    Lease Bonus. 5,000
    T. rent payment 51,410
    divide: 4 years
    Annual expense 12,852.5

    "I have set the Lord continually before me. Because He is at my right hand, I will not be shaken." – (Psalm 16:8)

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