WGU D105 OA #2 EXAM WITH CORRECT
ACTUAL QUESTIONS AND CORRECTLY
WELL DEFINED ANSWERS LATEST
ALREADY GRADED A+
A start-up company is trying to decide if it should purchase
or lease cellular phones for its 2,500 new employees. Which
decision should the company make? - ANSWERS-Lease,
because leasing can pass the risk of residual value to the
lessor
Company A leases cars from Company B for their
salespeople. The leases are for three years. Company A paid
a commission to a third party for helping to negotiate the
leases from Company B. How should Company A account for
this commission? - ANSWERS-Include the commission in the
amount for the right-of-use asset but not in the lease
liability
Company A leases computers from Company B with annual
payments of $6,469. The leases are for two years, and the
,computers have an economic life of three years. At the end
of the lease, the computers are expected to have a residual
value of $5,000. Company A has an option to purchase the
computers for $2,000 at the end of the lease agreement,
which it expects to do. The fair value of the lease is $15,000,
and the present value of the lease is $12,689. The present
value of the option to purchase the computers is $1,849.
How should Company A account for the amortization of the
computers due to the bargain purchase option? - ANSWERS-
It should amortize $14,538 using the economic life of the
computers
Which two finance lease elements are a part of each lease
payment? - ANSWERS-A reduction of the lease liability and
the financing cost (interest expense)
Company A agrees to lease racks to Company B for five
years. The expected economic life of the racks are five years.
At the end of the lease, Company B has the right to
purchase the racks for $5,000, but the company is not
certain it will exercise the right. Which test does the lease
pass to be classified as a finance lease? - ANSWERS-Lease
term
,A lessor leases a piece of equipment to a lessee, under lease
terms that qualify as an operating lease. The present value
of required rental payments is $280,000; and the present
value of the estimated residual value, which is
unguaranteed, is $30,000. The lessor incurred total costs of
$160,000 to build the leased asset. Which amount of lease
receivable, if any, should the lessor record? - ANSWERS-$0
A company wishes to avoid classifying a lease as a finance
lease. Which criterion will prevent the company from
reaching this goal? - ANSWERS-There is a bargain price
option.
A company is looking for additional guidance on which
equipment to lease. The company is using a lessor that has
knowledge about the parent's product that can be passed
on to the company. Which lessor is being used by the
lessee? - ANSWERS-Captive leasing companies
Company A agrees to lease a robotic welding unit from
Company B on January 1, Year 1. The following conditions
apply to the lease:
- The term of the lease is five years, is non-cancellable, and
requires payments of $101,350 at the beginning of each
year.
, - The robotic welding unit will have an estimated fair value
of $50,000 at the end of the lease; an estimated useful life
of five years; and $45,000 guaranteed residual value.
- There are no renewal options, so the unit will revert to
Company B at the termination of the lease.
- Company A can borrow at a 5% interest rate.
- Company A uses straight-line depreciation on its assets.
- Company B set its annual rate of return at 4%, and
Company A is aware of this rate.
- Present values are as follows:Present value of lease
payments at 4%: $469,240Present value of lease payments
at 5%: $460,737Present value of residual at 4%:
$38,457Present value of residual at 5%: $37,021 - ANSWERS-
$469,240
Company A leases a piece of machinery from Company B on
January 1, Year 1. Information pertaining to the lease is as
follows:
- The lease is non-cancellable with a term of three years
- The machinery has a cost and fair value at the start of the
lease of $40,000; an estimated economic life of five years;
and a residual value at the end of the lease of $7,500
(unguaranteed)
ACTUAL QUESTIONS AND CORRECTLY
WELL DEFINED ANSWERS LATEST
ALREADY GRADED A+
A start-up company is trying to decide if it should purchase
or lease cellular phones for its 2,500 new employees. Which
decision should the company make? - ANSWERS-Lease,
because leasing can pass the risk of residual value to the
lessor
Company A leases cars from Company B for their
salespeople. The leases are for three years. Company A paid
a commission to a third party for helping to negotiate the
leases from Company B. How should Company A account for
this commission? - ANSWERS-Include the commission in the
amount for the right-of-use asset but not in the lease
liability
Company A leases computers from Company B with annual
payments of $6,469. The leases are for two years, and the
,computers have an economic life of three years. At the end
of the lease, the computers are expected to have a residual
value of $5,000. Company A has an option to purchase the
computers for $2,000 at the end of the lease agreement,
which it expects to do. The fair value of the lease is $15,000,
and the present value of the lease is $12,689. The present
value of the option to purchase the computers is $1,849.
How should Company A account for the amortization of the
computers due to the bargain purchase option? - ANSWERS-
It should amortize $14,538 using the economic life of the
computers
Which two finance lease elements are a part of each lease
payment? - ANSWERS-A reduction of the lease liability and
the financing cost (interest expense)
Company A agrees to lease racks to Company B for five
years. The expected economic life of the racks are five years.
At the end of the lease, Company B has the right to
purchase the racks for $5,000, but the company is not
certain it will exercise the right. Which test does the lease
pass to be classified as a finance lease? - ANSWERS-Lease
term
,A lessor leases a piece of equipment to a lessee, under lease
terms that qualify as an operating lease. The present value
of required rental payments is $280,000; and the present
value of the estimated residual value, which is
unguaranteed, is $30,000. The lessor incurred total costs of
$160,000 to build the leased asset. Which amount of lease
receivable, if any, should the lessor record? - ANSWERS-$0
A company wishes to avoid classifying a lease as a finance
lease. Which criterion will prevent the company from
reaching this goal? - ANSWERS-There is a bargain price
option.
A company is looking for additional guidance on which
equipment to lease. The company is using a lessor that has
knowledge about the parent's product that can be passed
on to the company. Which lessor is being used by the
lessee? - ANSWERS-Captive leasing companies
Company A agrees to lease a robotic welding unit from
Company B on January 1, Year 1. The following conditions
apply to the lease:
- The term of the lease is five years, is non-cancellable, and
requires payments of $101,350 at the beginning of each
year.
, - The robotic welding unit will have an estimated fair value
of $50,000 at the end of the lease; an estimated useful life
of five years; and $45,000 guaranteed residual value.
- There are no renewal options, so the unit will revert to
Company B at the termination of the lease.
- Company A can borrow at a 5% interest rate.
- Company A uses straight-line depreciation on its assets.
- Company B set its annual rate of return at 4%, and
Company A is aware of this rate.
- Present values are as follows:Present value of lease
payments at 4%: $469,240Present value of lease payments
at 5%: $460,737Present value of residual at 4%:
$38,457Present value of residual at 5%: $37,021 - ANSWERS-
$469,240
Company A leases a piece of machinery from Company B on
January 1, Year 1. Information pertaining to the lease is as
follows:
- The lease is non-cancellable with a term of three years
- The machinery has a cost and fair value at the start of the
lease of $40,000; an estimated economic life of five years;
and a residual value at the end of the lease of $7,500
(unguaranteed)
