Exam (elaborations)
ACCO-320 Final-Exam Mock 2024 with complete solution
- Course
- ACCO 320
- Institution
- Concordia University ( )
ACCO-320 Final-Exam Mock 2024 with complete solution
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ACCO-320 Final-Exam Mock 2024 with complete solution, ACCO 320 FINAL MOCK
EXAM
SECTION I
No International Industries (NII) , Inc., leased a drone to Frequent Flying Folks, Ltd., [FFF] on January
Fair value of leased drone $260,000
Useful life Lease term 15 years
10 years
Payment frequency Annual
Payment timing annually January 1
Annual payments at the beginning of each year First payment$33,000
made
Estimated residual value at end of the lease, unguaranteed January 1, 2019
Ownership of drone reverts to lessor at end of lease term $45,000
Interest rate implicit in the lease [unknown to the lessee] 7%
Lessee incremental borrowing rate Year end for both companies
8%Amortization method - FFF Accoun
- NII December 31 Straight line ASPE
IFRS
REQUIRED: Select the alphabet of the one best answer to each of the questions listed below and in
in the computer.
Assume for Questions [1] - [4] below that the residual value of the leased asset was not guaranteed
1] How should FFF classify the
lease? Select one:
a.An operating lease because the ownership rights are not acquired by the lessee.
b.A capital lease because the lease term is less than the useful life of the asset.
c.A capital lease because the contract conveys the right to control the use of an
identified asset for a defined period of time in exchange for consideration.
d.An operating lease because FFF is not applying IFRS 16.
e. A capital lease because the contract terms meet one of the criteria specified by ASPE.
2
, 2] Assume that FFF decides to classify the lease contract as a capital lease. This
was done because Select one:
a.the contract transferred the ownership rights to the lessee and thus met the ownership criterion.
b.the contract met the criterion for the economic life test that most of the
risks and rewards of ownership will accrue to the lessee, FFF.
c.a minimum lease payment of $33,000 exceeds 10% of the fair market value of
d. the leased asset. the contract met the criterion for the recovery of investment
test as the present value of the total
minimum lease payments is nearly 92% of the fair value of the leased asset.
e. it does not know the implicit rate of the lease contract as used by the lessor, NII.
3] The journal entry prepared by FFF to record the lease contract on January
1, 2019 would be Select one:
a.Assets Under Capital Lease, $330,000; CR Obligation Under Capital Lease, $330,000 .
b.Assets Under Capital Lease, $239,147; CR Obligation Under Capital Lease, $239,147 .
c.Assets Under Capital Lease, $239,147; CR Cash, $239,147 .
d.Assets Under Capital Lease, $260,000; CR Obligation Under Capital Lease, $260,000.
e.Assets Under Capital Lease, $259,991; CR Obligation Under Capital Lease, $259,991.
4] The journal entry prepared by FFF to record any other transaction related to the
lease contract on January 1, 2019.
Select one:
a.DR Cash, $33,000; CR Obligation Under Capital Lease, $33,000 .
b.DR Obligation Under Capital Lease, $33,000; CR Cash, $33,000 .
c.DR Executory Costs - Capital Lease, $33,000; CR Cash, $33,000 .
d.DR Interest Expensese, $33,000; CR Cash, $33,000 .
e.No journal entry required as there was no other transaction on January 1, 2019.
Assume for Questions [5] - [8] below that the residual value of the leased asset was guaranteed.
5] Now assume that the residual value of the leased asset was guaranteed by the lessee. The journal en
Select one:
DR Assets Under Capital Lease, $330,000; CR Obligation Under Capital Lease, $330,000 .
DR Assets Under Capital Lease, $239,147; CR Obligation Under Capital Lease, $239,147 .
DR Assets Under Capital Lease, $239,147; CR Cash, $239,147 .
DR Assets Under Capital Lease, $259,991; CR Obligation Under Capital Lease, $259,991 .
DR Assets Under Capital Lease, $342,000; CR Obligation Under Capital Lease, $342,000.
6] What would be the amount of interest expense for 2019 if the residual value was
guaranteed by the lessee? [Round to the nearest dollar]
Select
one: a.
$18,159.
b. $20,799.
c. $26,400.
d. $19,132.
e. $16,740.
3
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