E 15–25 Concepts; terminology

Listed below are several terms and phrases associated with leases. Pair each item from List A with the item from List B (by letter) that is most appropriately associated with it.

Exercise 15-25

  List A  List B

. Effective rate times balance. a. PV of BPO price.

. Realization principle. b. Lessor’s net investment.

 Minimum lease payments plus  c. Lessor’s gross investment.

unguaranteed residual value. d. Operating lease.

. Periodic lease payments plus  e. Depreciable assets.

 lessee-guaranteed residual value. f. Loss to lessee. 

 PV of minimum lease payments plus g. Executory costs.  
 PV of unguaranteed residual value. h. Depreciation longer than lease term. 

 Initial direct costs.   i. Disclosure only.

 Rent revenue. j. Interest expense.

 Bargain purchase option.   k. Additional lessor conditions.

 Leasehold improvements.   l. Lessee’s minimum lease payments

 Cash to satisfy residual value  m. Purchase price less than fair value.

guarantee. 

 Capital lease expense. n. Sales-type lease selling expense.

 Deducted in lessor’s computation  o. Lessor’s minimum lease payments.

of lease payments. 

 Title transfers to lessee.  

Contingent rentals. 

 Lease payments plus lessee-guaranteed and 3rd-party-guaranteed residual value.