Which of the following is an advantage of captive leasing companies over the other players in the leasing market?
a. They have access to low-cost funds allowing them to purchase assets at lower cost.
b. They are good at developing innovative contracts that help avoid accounting problems.
c. They provide leasing arrangements for a wider range of products than the parent company's product line.
d. They have the paint-of-sale advantage in finding leasing customers.
Answer: They have the paint-of-sale advantage in finding leasing customers
Which of the following best describes current practice in accounting for leases?
a. Leases are not capitalized.
b. Leases similar to installment purchases are capitalized.
c. All long-term leases are capitalized.
d. All leases are capitalized.
Answer: Leases similar to installment purchases are capitalized
The amount to be recorded as the cost of an asset under capital lease is equal to the
a. present value of the minimum lease payments.
b. present value of the minimum lease payments or the fair value of the asset, whichever is lower.
c. present value of the minimum lease payments plus the present value of any unguaranteed residual value.
d. carrying value of the asset on the lessor's books.
Answer: present value of the minimum lease payments or the fair value of the asset, whichever is lower
