Chapter 21, Accounting for Leases Video Solutions, Intermediate Accounting

01:09

Problem 1

What are the major lessor groups in the United States? What advantage does a captive have in a leasing arrangement?

Oluwadamilola Ameobi

Numerade Educator

01:56

Bradley Co. is expanding its operations and is in the process of selecting the method of financing this program. After some investigation, the company determines that it may (1) issue bonds and with the proceeds purchase the needed assets or (2) lease the assets on a long-term basis. Without knowing the comparative costs involved, answer these questions:
(a) What might be the advantages of leasing the assets instead of owning them?
(b) What might be the disadvantages of leasing the assets instead of owning them?
(c) In what way will the balance sheet be differently affected by leasing the assets as opposed to issuing bonds and purchasing the assets?

Rashmi Sinha

Numerade Educator

02:08

Problem 3

Identify the two recognized lease-accounting methods for lessees and distinguish between them.

Ameer Said

Numerade Educator

02:28

Problem 4

Ballard Company rents a warehouse on a month-to-month basis for the storage of its excess inventory. The company periodically must rent space whenever its production greatly exceeds actual sales. For several years the company officials have discussed building their own storage facility, but this enthusiasm wavers when sales increase sufficiently to absorb the excess inventory. What is the nature of this type of lease arrangement, and what accounting treatment should be accorded it?

Eric Mockensturm

Numerade Educator

14:20

Problem 5

Distinguish between minimum rental payments and minimum lease payments, and indicate what is included in minimum lease payments.

Oswaldo Jiménez

Numerade Educator

03:07

Problem 6

Explain the distinction between a direct-financing lease and a sales-type lease for a lessor.

Shivani Sharma

Numerade Educator

01:45

Problem 7

Outline the accounting procedures involved in applying the operating method by a lessee.

Oluwadamilola Ameobi

Numerade Educator

01:45

Problem 8

Outline the accounting procedures involved in applying the capital-lease method by a lessee.

Oluwadamilola Ameobi

Numerade Educator

01:05

Problem 9

Identify the lease classifications for lessors and the criteria that must be met for each classification.

Sunshine Brosi

Numerade Educator

01:45

Problem 10

Outline the accounting procedures involved in applying the direct-financing method.

Oluwadamilola Ameobi

Numerade Educator

01:45

Problem 11

Outline the accounting procedures involved in applying the operating method by a lessor.

Oluwadamilola Ameobi

Numerade Educator

02:31

Problem 12

Walker Company is a manufacturer and lessor of computer equipment. What should be the nature of its lease arrangements with lessees if the company wishes to account for its lease transactions as sales-type leases?

Breanna Ollech

Numerade Educator

01:57

Problem 13

Metheny Corporation's lease arrangements qualify as sales-type leases at the time of entering into the transactions. How should the corporation recognize revenues and costs in these situations?

Mihir Nayar

Numerade Educator

02:34

Problem 14

Alice Foyle, M.D. (lessee) has a noncancelable 20 -year lease with Brown back Realty, Inc. (lessor) for the use of a medical building. Taxes, insurance, and maintenance are paid by the lessee in addition to the fixed annual payments, of which the present value is equal to the fair market value of the leased property. At the end of the lease period, title becomes the lessee's at a nominal price. Considering the terms of the lease described above, comment on the nature of the lease transaction and the accounting treatment that should be accorded it by the lessee.

Vishal Parmar

Numerade Educator

04:59

Problem 15

The residual value is the estimated fair value of the leased property at the end of the lease term.
(a) Of what significance is (1) an unguaranteed and (2) a guaranteed residual value in the lessee's accounting for a capitalized-lease transaction?
(b) Of what significance is (1) an unguaranteed and (2) a guaranteed residual value in the lessor's accounting for a direct-financing lease transaction?

Harmender Singh Yadav

Numerade Educator

01:55

Problem 16

How should changes in the estimated unguaranteed residual value be handled by the lessor?

Oluwadamilola Ameobi

Numerade Educator

01:28

Problem 17

Describe the effect of a "bargain-purchase option" on accounting for a capital-lease transaction by a lessee.

Jennifer Stoner

Numerade Educator

02:21

Problem 18

What are "initial direct costs" and how are they accounted for?

Ameer Said

Numerade Educator

02:25

Problem 19

What disclosures should be made by lessees and lessors related to future lease payments?

Puneet Prajapati

Numerade Educator