11) Which of the following statements regarding leases is correct?

A) Capital leases are favored over operating leases.

B) A debit balance in the Leased Asset account on the balance sheet indicates an operating lease.

C) Title is transferred to the lessee at the end of an operating lease term.

D) Operating leases require the lessee to make rent payments.

12) Wayne Technical Corporation signed a lease for $150,000 for equipment. The equipment has an estimated useful life of 7 years. This lease would be considered to be a capital lease if:

A) the equipment is leased for 4 years.

B) the present value of the lease payments equals $40,000.

C) title to the equipment transfers to Wayne at the end of the lease term.

D) the lease agreement allows Wayne to purchase the truck for $75,000 at the end of the lease.

13) Which type of lease will NOT increase a company's assets or long-term liabilities?

A) An operating lease.

B) A capital lease.

C) A lease that contains a bargain purchase option.

D) A lease that transfers title of the leased asset to the lessee at the end of the lease term.

14) If the present value of the lease payments is 90% or more of the market value of the leased asset, the:

A) lease is not cost-effective and should be cancelled.

B) lease may be classified as an operating lease.

C) one of the criteria is met for the lease to be considered a capital lease.

D) lease may be recorded off-balance sheet.

15) To determine whether a pension plan is over-funded or under-funded, a company must compare the:

A) fair market value of the pension plan assets to the accumulated benefit obligation.

B) cost of the pension plan assets to the accumulated benefit obligation.

C) accumulated benefit obligation to the plan's anticipated obligations.

D) fair market value of the pension plan assets to the net income on the Income Statement.

16) East-West Airlines is planning on leasing an aircraft. East-West does not receive title to the aircraft during or at the end of the lease period. Also, the lease does not contain a bargain purchase option. Using the lease information shown below indicate whether the lease is a capital lease or an operating lease and explain why.

17) East-West Airlines is planning on leasing an aircraft. East-West does not receive title to the aircraft during or at the end of the lease period. Also, the lease does not contain a bargain purchase option. Using the lease information shown below indicate whether the lease is a capital lease or an operating lease and explain why.

18) East-West Airlines is planning on leasing an aircraft. East-West does not receive title to the aircraft during or at the end of the lease period. Also, the lease does not contain a bargain purchase option. Using the lease information shown below indicate whether the lease is a capital lease or an operating lease and explain why.