9.5 Account for long-term debt
1) Bonds payable are supported by a promissory note.
2) A mortgage is a special type of long-term note payable.
3) A mortgage is a secured note because the building serves as collateral.
4) Bonds are interest-bearing notes that are issued to a single lender.
5) A person or business who pays another party for the use of an asset is a lessee.
6) A lessor is a person who gives/ grants a lease.
7) Operating lease payments are expenses to the lessee and revenue to the lessor.
8) Rental agreements are typically:
A) capital leases.
B) operating leases.
C) expense leases.
D) revenue leases.
E) financial leases.
9) Leases that are treated as financed purchases are called:
A) capital leases.
B) operating leases.
C) expense leases.
D) revenue leases.
E) non-financial leases.
10) Which of the following is NOT a requirement of a capital lease?
A) There is no transfer of ownership at the end of the lease.
B) The agreement has a bargain purchase option.
C) The lease must cover at least 75% of asset's useful life.
D) The present value of lease payments must be 90% or more of market value of asset.
E) The present value of lease payments equals substantially all of the fair value of the leased property at the inception of the lease.