2026/2027 CLFP EXAM LATEST ACTUAL EXAM TEST
BANK| FINANCIAL AND TAX ACCOUNTING FOR LEASES
EXAM WITH COMPLETE 400 REAL EXAM QUESTIONS
AND CORRECT VERIFIED ANSWERS/ ALREADY GRADED
A+ (BRAND NEW!!)
What is a Bargain Renewal Option? - CORRECT ANSWER ✔✔- a provision allowing
lessee, at his option, to renew the lease for a rental sufficiently lower than the
expected fair value of the property at the date the option becomes excercisable.
It is reasonably assured the renewal option will be exercised.
What is a Bargain Purchase Option? - CORRECT ANSWER ✔✔- a provision allowing
lessee, at his option, to purchase the property for a price sufficiently lower than
the expected fair market value of the property at the date the option becomes
excercisable. It is reasonably assured the purchase option will be exercised.
What are Contingent Rentals? - CORRECT ANSWER ✔✔- Rentals that represent
increases or decreases in the lease payments made that result from changes in
the factors on which lease payments are based occurring subsequent to the
inception of the lease. Increases may occur due to increased construction cost or
indexed interest rates.
What is Economical Useful Life of Leased Property? - CORRECT ANSWER ✔✔- At
the inception of the the lease, the estimated remaining period during which the
property is expected to be economically usable for its intended purpose by one or
more users. This may be impacted by usage, technology and deterioration.
Independent of lease term.
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,What is Residual Value of Leased Property? - CORRECT ANSWER ✔✔- Estimated
fair value of the lease property at the end of the lease.
What is Executory Costs? - CORRECT ANSWER ✔✔- The costs such as insurance,
maintenance and taxes incurred for the leased property, whether paid by lessor
or lessee. Also include costs paid by lessee as guarantor.
What is Value of Leased Property? - CORRECT ANSWER ✔✔- The price at which
the property could be sold at an arm's length transaction by unrelated parties.
1.) normal selling price, net volume discounts, for a lessor who
manufacturer/dealer
2.) Cost, net volume discounts for a lessor that is note a manufacturer or dealer.
What is Implicit Interest Rate? - CORRECT ANSWER ✔✔- The discount rate that,
when applied to the minimum lease payments cause the aggregate present value
at the beginning of the lease term to be equal to the fair value of the leased
property to the lessor at the inception of the lease.
What is Inception of the Lease? - CORRECT ANSWER ✔✔- The date lease
commitment.
What is Incremental Borrowing Rate? - CORRECT ANSWER ✔✔- The rate, at the
inception of the lease, the lessee would have incurred to borrow, under like
terms, the funds necessary to purchase the lease asset.
What is Initial Direct Cost (IDC)? - CORRECT ANSWER ✔✔- Costs incurred by lessor
that are
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,1) to originate the lease in transactions with independent third parties that are
required and would have occurred regardless of leasing
2.) certain cost incurred by the lessor
What is a Lease? - CORRECT ANSWER ✔✔- An agreement conveying right to use
property, plant or equipment for stated period of time and rental payment.
What is Lease Term? - CORRECT ANSWER ✔✔- The fixed, non cancel-able term of
the lease plus:
1.) period covered by bargain renewal options
2.) period covered by a renewal when a significant penalty for failure to renew
exists;
3.) Ordinary renewal periods
4.) Renewal periods that precede a bargain purchase option.
5.) Renewal periods that are at the option of the lessor
6.) does not exceed term beyond when the bargain purchase option can be
exercised.
What is Maximum Lease Payments? - CORRECT ANSWER ✔✔- All payments the
lessee is obligated to make under the lease agreement (outside of executory
costs)
1.) minimum rentals
2.) Lessee guarantee of the residual value
3.) Penalties for failure to renew.
4.) Calc for lessor to include guaranteed residual
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, What is a Non-Cancelable Lease? - CORRECT ANSWER ✔✔- A lease that is only
cancelable upon:
1.) Occurrence of some remote contingency;
2.) Permission of lessor;
3.) Entrance into a new lease with the same lessor;
4.) Payment of a penalty in an amount that makes continuation of the lease
reasonably assured.
What is Renewal or Extension of a Lease? - CORRECT ANSWER ✔✔- The
continuation of a lease agreement beyond the original term, including a new
lease where the lessee continues to use the same property.
What is Sale-Leaseback Accounting? - CORRECT ANSWER ✔✔- A method of
accounting for transactions in which the seller-lessee records the sale , removes
the property and related liabilities from its balance sheet, recognizes gain or loss
from the sale and classifies the leaseback in accordance with proper lease
accounting
What is Unguaranteed Residual Value? - CORRECT ANSWER ✔✔- The estimated
residual value of the leased property exclusive of any portion guaranteed by the
lessee or by a third party unrelated to the lessor. If the guarantor is related to the
lessor, the residual value is considered unguaranteed
What are the three types of Lessor Financial Statements classification? - CORRECT
ANSWER ✔✔- 1.) Operating
2.) Direct financing (capital lease)
3) Sale-type (capital lease)
4) If lender is lending cash - typically capital lease
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BANK| FINANCIAL AND TAX ACCOUNTING FOR LEASES
EXAM WITH COMPLETE 400 REAL EXAM QUESTIONS
AND CORRECT VERIFIED ANSWERS/ ALREADY GRADED
A+ (BRAND NEW!!)
What is a Bargain Renewal Option? - CORRECT ANSWER ✔✔- a provision allowing
lessee, at his option, to renew the lease for a rental sufficiently lower than the
expected fair value of the property at the date the option becomes excercisable.
It is reasonably assured the renewal option will be exercised.
What is a Bargain Purchase Option? - CORRECT ANSWER ✔✔- a provision allowing
lessee, at his option, to purchase the property for a price sufficiently lower than
the expected fair market value of the property at the date the option becomes
excercisable. It is reasonably assured the purchase option will be exercised.
What are Contingent Rentals? - CORRECT ANSWER ✔✔- Rentals that represent
increases or decreases in the lease payments made that result from changes in
the factors on which lease payments are based occurring subsequent to the
inception of the lease. Increases may occur due to increased construction cost or
indexed interest rates.
What is Economical Useful Life of Leased Property? - CORRECT ANSWER ✔✔- At
the inception of the the lease, the estimated remaining period during which the
property is expected to be economically usable for its intended purpose by one or
more users. This may be impacted by usage, technology and deterioration.
Independent of lease term.
1|Page
,What is Residual Value of Leased Property? - CORRECT ANSWER ✔✔- Estimated
fair value of the lease property at the end of the lease.
What is Executory Costs? - CORRECT ANSWER ✔✔- The costs such as insurance,
maintenance and taxes incurred for the leased property, whether paid by lessor
or lessee. Also include costs paid by lessee as guarantor.
What is Value of Leased Property? - CORRECT ANSWER ✔✔- The price at which
the property could be sold at an arm's length transaction by unrelated parties.
1.) normal selling price, net volume discounts, for a lessor who
manufacturer/dealer
2.) Cost, net volume discounts for a lessor that is note a manufacturer or dealer.
What is Implicit Interest Rate? - CORRECT ANSWER ✔✔- The discount rate that,
when applied to the minimum lease payments cause the aggregate present value
at the beginning of the lease term to be equal to the fair value of the leased
property to the lessor at the inception of the lease.
What is Inception of the Lease? - CORRECT ANSWER ✔✔- The date lease
commitment.
What is Incremental Borrowing Rate? - CORRECT ANSWER ✔✔- The rate, at the
inception of the lease, the lessee would have incurred to borrow, under like
terms, the funds necessary to purchase the lease asset.
What is Initial Direct Cost (IDC)? - CORRECT ANSWER ✔✔- Costs incurred by lessor
that are
2|Page
,1) to originate the lease in transactions with independent third parties that are
required and would have occurred regardless of leasing
2.) certain cost incurred by the lessor
What is a Lease? - CORRECT ANSWER ✔✔- An agreement conveying right to use
property, plant or equipment for stated period of time and rental payment.
What is Lease Term? - CORRECT ANSWER ✔✔- The fixed, non cancel-able term of
the lease plus:
1.) period covered by bargain renewal options
2.) period covered by a renewal when a significant penalty for failure to renew
exists;
3.) Ordinary renewal periods
4.) Renewal periods that precede a bargain purchase option.
5.) Renewal periods that are at the option of the lessor
6.) does not exceed term beyond when the bargain purchase option can be
exercised.
What is Maximum Lease Payments? - CORRECT ANSWER ✔✔- All payments the
lessee is obligated to make under the lease agreement (outside of executory
costs)
1.) minimum rentals
2.) Lessee guarantee of the residual value
3.) Penalties for failure to renew.
4.) Calc for lessor to include guaranteed residual
3|Page
, What is a Non-Cancelable Lease? - CORRECT ANSWER ✔✔- A lease that is only
cancelable upon:
1.) Occurrence of some remote contingency;
2.) Permission of lessor;
3.) Entrance into a new lease with the same lessor;
4.) Payment of a penalty in an amount that makes continuation of the lease
reasonably assured.
What is Renewal or Extension of a Lease? - CORRECT ANSWER ✔✔- The
continuation of a lease agreement beyond the original term, including a new
lease where the lessee continues to use the same property.
What is Sale-Leaseback Accounting? - CORRECT ANSWER ✔✔- A method of
accounting for transactions in which the seller-lessee records the sale , removes
the property and related liabilities from its balance sheet, recognizes gain or loss
from the sale and classifies the leaseback in accordance with proper lease
accounting
What is Unguaranteed Residual Value? - CORRECT ANSWER ✔✔- The estimated
residual value of the leased property exclusive of any portion guaranteed by the
lessee or by a third party unrelated to the lessor. If the guarantor is related to the
lessor, the residual value is considered unguaranteed
What are the three types of Lessor Financial Statements classification? - CORRECT
ANSWER ✔✔- 1.) Operating
2.) Direct financing (capital lease)
3) Sale-type (capital lease)
4) If lender is lending cash - typically capital lease
4|Page
