Practice Test

Q1) The principal reason for the existence of leasing is that Show Answer

Q2) A way to analyze whether debt or lease financing would be preferable is to Show Answer

Q3) A conventional revolving credit agreement allows a firm Show Answer

Q4) The type of lease that includes a third party, a lender is called a Show Answer

Q5) One advantage of financial lease is that Show Answer

Q6) Medium term notes have maturities that range up to Show Answer

Q7) A direct lease, a sale and leaseback, and a leveraged lease are all example of Show Answer

Q8) An essential element in a lease agreement is that the Show Answer

Q9) Executor costs include Show Answer

Q10) Which of the following is not a possible advantage of leasing? Show Answer

Q11) Which of the following best describes current standards in accounting for leases? Show Answer

Q12) Which of the following is a correct statement regarding one of the ASPE capitalization criteria? Show Answer

Q13) For a lessee, the minimum lease payments may include Show Answer

Q14) In calculating the present value of the minimum lease payments, IFRS requires the lessee should Show Answer

Q15) Regarding a basic capital (finance) lease for a lessee , which of the following statements is incorrect? Show Answer

Q16) When a lessee is accounting for a capital(finance) lease Show Answer

Q17) In calculating depreciation of a leased asset, the lessee should subtract Show Answer

Q18) In the earlier years of a lease, from the lessee’s perspective, accounting for a leased asset as Show Answer

Q19) For companies engaged in direct financing leases ( called “other financing leases” under IFRS) Show Answer

Q20) For A Lessor, Which Of The Following Would Not Be Included In The Gross Investment in Lease ( Lease Payment Receivable) Show Answer

Q21) In a lease that is appropriately recorded as a direct financing lease (other financing lease) by the lessor, the unearned interest or finance income is Show Answer

Q22) For a sales – type lease ( called a manufacturer or dealer lease in IFRS) Show Answer

Q23) Initial direct costs are Show Answer

Q24) The obligations under capital leases should be disclosed as Show Answer

Q25) Which statement is correct regarding the contract based approach advocated by the IASB and FASB Show Answer

Q26) If a corporation adhering to IFRS sells machinery and then leases it back (sale – leaseback) as a finance lease, any gain on the sale should be Show Answer

Q27) If land is the sole property leased, and title does not transfer at the end of the lease, it should be accounted for as an Show Answer

Q28) The act of buying an asset without having to make full payment in the immediate future is known as Show Answer

Q29) The double entry need to record the purchase of an asset through hire purchase would be Show Answer

Q30) When repaying by installments to a supplier for a hire purchase, the double entry to record this repayment would be Show Answer

Q31) The rules for how to deal with leases and hire purchase contracts is dealt with in which accounting standard? Show Answer

Q32) On the balance sheet of a company, the value of the asset bought through hire purchase will appear as Show Answer

Q33) Which of the following is not a feature of an operating lease? Show Answer

Q34) When making repayments on a lease, the profit and loss account will contain which items relevant to the lease? Show Answer

Q35) According to the relevant accounting standard, when assets are bought by foreign branches on different dates how should we account for changes in the exchange rates on those dates? Show Answer

Q36) The depreciation on an asset purchased through hire purchased should be Show Answer

Q37) The profit on interest charged on the hire purchase should appear in the profit and loss account in what manner Show Answer

Q38) When does the asset legally belong to the purchaser under a hire purchase agreement? Show Answer

Q39) Which of the following does not give a difference between a hire purchase and a normal purchase Show Answer

Q40) A refrigerator is priced at $10000. A deposit of 16% on simple interest of 11% per year over 2 year and repayments paid monthly then amount of deposit made is Show Answer

Q41) Television is priced at $10000. A deposit of 16% on simple interest of 11% per year over 2 year and repayments paid monthly then monthly installments is Show Answer

Q42) Television is priced at $10000. A deposit of 16% on simple interest of 11% per year over 2 year and repayments paid monthly then additional amount to pay in 24 monthly installments after deposit is Show Answer

Q43) A refrigerator is priced at $10000. A deposit of 16% on simple interest of 11% per year over 2 year and repayments paid monthly then interest on remaining amount for 2 years after deposit is Show Answer

Q44) Henry buys a designer furniture set at price of $1200. He pays 25% deposit and interest in 36 months plus outstanding balance. Interest charged on balance is 12%. Total hire purchase price is Show Answer

Q45) Installment is equal to _______ Show Answer

Q46) Initial payment made on signing of agreement is ________ Show Answer

Q47) Term financing is short term debt, typically used to purchase short term assets (such as seasonal inventories) that tend to be self liquidating Show Answer

Q48) All other things equal, the interest rate on a term loan is higher than the rate on a short term loan Show Answer

Q49) The before tax cost of debt is lower than the after tax cost of debt because taxes add on additional burden over and above interest payment Show Answer

Q50) In a sale and leaseback arrangement, the seller is the lessee and the buyer is the lessor Show Answer

Q51) Under a conditional sales contract, the title passes to the buyer when the first installments payment is made Show Answer

Q52) The minimum working capital requirement is probably the most commonly used loan covenant in a loan agreement Show Answer

Q53) A term loan agreement containing a prepayment penalty clause is more likely to have an insurance company rather than a bank as the lender Show Answer

Q54) A lender in a chattel mortgage contract is forbidden to sell the movable property when the borrower defaults Show Answer

Q55) Renting a car for a week through jack’s rent-a-lemon is an example of a financial lease Show Answer

Q56) The discount rate to be used in evaluating lease financing versus debt financing is the firm’s overall cost of capital Show Answer

Q57) Lease rental increase tax liability Show Answer

Q58) Under hire purchase system purchaser become owner of goods on signing of agreement Show Answer

Q59) In lease system, interest is calculated on Show Answer

Q60) A short term lease which is often cancellable is known as Show Answer

Q61) Which of the following is not a usual type of lease arrangement ?? Show Answer

Q62) Under the provision of AS 19 leases, least as it is shown in the balance sheet of Show Answer

Q63) A lease which is generally not cancellable and covers full economic life of the asset is known as: Show Answer

Q64) From the point of view of Lessee , a lease is a: Show Answer

Q65) For a Lessor, a lease is a Show Answer

Q66) Which of the following is not true for a lease or buy decision for the Lessee? Show Answer

Q67) A Lease is a temporary transfer of title of an aside in return for a rental income Show Answer

Q68) Least transaction in India are governed by the lease act. Show Answer

Q69) Technically, the lessee becomes the owner of the asset for the lease period. Show Answer

Q70) And operating lease and sales and leaseback are different types of transaction. Show Answer

Q71) Sales and lease back and leverage lease are types of finance lease. Show Answer

Q72) Treatment of operating lease in AS-19 is almost same as required by tax law in India Show Answer

Q73) As per AS-19, in case of finance lease, the asset is shown in the balance sheet of the lessee Show Answer

Q74) Lease financing is the type of capital budgeting decision from the point of view of the lessee. Show Answer

Q75) Tax shield on depreciation and interest is an important variable both for the Lessor and the lessee. Show Answer

Q76) Lessee should evaluate the lease option as against the buying option. Show Answer

Q77) The net benefit of leasing is the NPV of lease option from the point of view of the Lessee. Show Answer

Q78) Lease outflows should be discounted at the interest rate to find out the present value. Show Answer

Q79) It is Mandatory for the Lessor to transfer ownership to the lessee in case of financial leases. Show Answer

Q80) Depreciation is charged in the books of the owner in leasing as well as hire purchase. Show Answer

Q81) In case of lease Show Answer

Q82) Due to lease Show Answer

Q83) Lease rental Show Answer

Q84) Lease is only a Show Answer

Q85) The lessor in operating lease is Show Answer

Q86) A finance lease satisfies the condition Show Answer

Q87) In finance lease, the lessor recovers Show Answer

Q88) In case of lease the legal title is with Show Answer

Q89) Lease rentals are operating expenses which are Show Answer

Q90) Lease rental Show Answer

Q91) The period over which the asset is economically usable is Show Answer

Q92) In finance lease, lease rent covered is Show Answer

Q93) Finance lease is for a Show Answer

Q94) A finance lease Show Answer

Q95) Annual lease rental is considered as cash outflow for Show Answer

Q96) Cost of asset is cash outflow to Show Answer

Q97) In leveraged lease there are Show Answer

Q98) In open ended lease, the lessee has the option to Show Answer

Q99) In cross border lease the parties to lease are domiciled in Show Answer

Q100) Buyer of goods under Hire purchase is called as a Show Answer

Q101) Amount paid at the time of taking delivery of goods is Show Answer

Q102) Hire purchase price is equal to Show Answer

Q103) Installment is equal to Show Answer

Q104) Depreciation is charged on asset at a certain rate on Show Answer

Q105) Under hire purchase agreement right of ownership is not passed on to the purchaser unless. Show Answer

Q106) In case of default in payment the seller under hire purchase can Show Answer

Q107) Hire purchase price means amount payable by the hirer which consists of Show Answer

Q108) Initial payment made on signing the agreement Show Answer

Q109) Hire purchase installment consists of Show Answer

Q110) Under hire purchase system, depreciation is provided by hirer purchaser on Show Answer

Q111) Under Full Cash method the asset is recorded at Show Answer

Q112) Interest in hire purchase transaction is charged on cash price which is Show Answer

Q113) Under hire purchase system purchaser become the owner on goods of Show Answer

Q114) Under installment system purchase becomes the owner of goods on Show Answer

Q115) Under hire purchase agreement the purchaser agrees to pay to the vendor Show Answer

Q116) The last installment in hire purchase includes Show Answer

Q117) Purchase of a machinery without making full payment immediately is called as Show Answer

Q118) The feature of hire purchase is Show Answer

Q119) X Ltd. Purchase a car from Y Ltd. On hire purchase basis. Cash price is Rs.50,000 Initial payment Rs.10,000 balance in four installment with 10% interest. The hirer is Show Answer

Q120) X Ltd. Purchase a car from Y Ltd. On hire purchase basis. Cash price is Rs.50,000 Initial payment Rs.10,000 balance in four installment with 10% interest. The hire vendor is Show Answer

Q121) X Ltd. Purchase a car from Y Ltd. On hire purchase basis. Cash price is Rs.50,000 Initial payment Rs.10,000 balance in four installment with 10% interest. The cash price is Show Answer

Q122) X Ltd. Purchase a car from Y Ltd. On hire purchase basis. Cash price is Rs.50,000 Initial payment Rs.10,000 balance in four installment with 10% interest. The initial payment is Show Answer

Q123) X Ltd. Purchase a car from Y Ltd. On hire purchase basis. Cash price is Rs.50,000 Initial payment Rs.10,000 balance in four installment with 10% interest. The interest for 1ST installment is Show Answer

Q124) In lease there is no legal transfer of title. Show Answer

Q125) Leased assets can be shown in the balance sheet of lessee. Show Answer

Q126) The lessee has to return the asset to the lessor after the expiry of the firm. Show Answer

Q127) Lessee is affected by the risk of obsolescence. Show Answer

Q128) Lease Rental reduces tax liability of the lessee. Show Answer

Q129) The lessee cannot claim ownership of the asset. Show Answer

Q130) Economic life is the period over which an assets is expected to be used economically. Show Answer

Q131) Fair value is the value at which an asset could be exchanged. Show Answer

Q132) Cost of assets is cash inflow for the lessor. Show Answer

Q133) Annual lease rental is cash outflow for the lessee. Show Answer

Q134) Maintenance cost is cash outflow for lessee. Show Answer

Q135) Lease management fees is cash inflow for lessor. Show Answer

Q136) In finance lease, the lessee is likely to exercise the option of purchase. Show Answer

Q137) In case of lease, the legal title is with the lessee. Show Answer

Q138) The person who sells the goods on hire purchase is a hire buyer. Show Answer

Q139) Hire purchase price excludes interest. Show Answer

Q140) Cash price includes interest. Show Answer

Q141) Depreciation is charged on cash price. Show Answer

Q142) Initial payment on signing the agreement is called Down Payment. Show Answer

Q143) Interest is always calculated on outstanding Cash Price. Show Answer

Q144) Right of ownership is transferred to the buyer on payment of first installment under Hire Purchase system. Show Answer

Q145) The seller can take back possession of the goods in case of default in payment. Show Answer

Q146) Under Hire Purchase, installment is treated as hire. Show Answer

Q147) Cash price is the purchase price payable if full payment is made immediately. Show Answer

Q148) Hire Purchase price is the purchase price if full payment is made immediately. Show Answer

Q149) Down payment is the initial payment made on signing the agreement. Show Answer

Q150) Under the purchase system depreciation is provided on cash price. Show Answer

Q151) Under hire purchase system depreciation is provided on hire purchase price. Show Answer

Q152) Full cash price method is known as credit purchase method. Show Answer

Q153) Hire purchase price is equal to cash price plus interest. Show Answer

Q154) Hire purchase price is known as cash price. Show Answer

Q155) In hire purchase buyer becomes the owner of asset on signing the agreement. Show Answer

Q156) In installment sale buyer becomes the owner of asset after payment of last payment. Show Answer

Q157) In hire purchase ownership is never transferred to the buyer. Show Answer

Q158) In installment sale ownership is transferred on signing the agreement. Show Answer

Q159) Down payment id payment made down the table. Show Answer

Q160) Cash price must be mentioned in the hire purchase agreement. Show Answer

Q161) Generally costly items are sold on hire purchase basis. Show Answer

Q162) Cheaper items are not purchased on hire purchase basis. Show Answer

Q163) Buyer does not provide depreciation on assets till he becomes the owner of the assets. Show Answer

Q164) In hire purchase agreement vendor pays interest to buyer. Show Answer

Q165) Under hire purchase system interest is charged on outstanding cash price. Show Answer

Q166) There is no difference between hire purchase price and cash price. Show Answer

Q167) Hire purchase price is higher than cash price. Show Answer

Q168) Cash price is included in hire purchase price. Show Answer

Q169) Difference between hire purchase price and cash price is interest. Show Answer

Q170) Hire purchase agreement must have minimum duration of 5 years. Show Answer

Q171) Actual cash price method is known as Asset Accrual method. Show Answer