ASU ACC 232 FINAL EXAM -FINANCIAL
ACCOUNTING I |ACTUAL QUESTIONS AND
VERIFIED ANSWERS|BRAND NEW 2026-2027
UPDATE|GRADED A+
Question 1
Which of the following best describes current practice in accounting for leases?
a. Leases are not capitalized.
b. All long-term leases are capitalized.
c. Leases similar to installment purchases are capitalized.
d. All leases are capitalized.
CORRECT ANSWER
C.
Question 2
Lease A does not contain a bargain purchase option, but the lease term is equal to 90
percent of the estimated economic life of the leased property. Lease B does not transfer
ownership of the property to the lessee by the end of the lease term, but the lease term is
equal to 75 percent of the estimated economic life of the leased property. How should the
lessee classify these leases?
Lease A Lease B
a. Operating lease Finance lease
b. Operating lease Operating lease
c. Finance lease Finance lease
d. Finance lease Operating lease
CORRECT ANSWER
C. Finance lease Finance lease
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,Question 3
In a finance lease, the lessee records
a. amortization expense only.
b. interest expense only.
c. lease expense only.
d. amortization expense and interest expense.
CORRECT ANSWER
D. amortization expense and interest expense.
Question 4
In computing the present value of the lease payments, the lessee should
a. use its incremental borrowing rate in all cases.
b. use both its incremental borrowing rate and the implicit rate of the lessor, assuming that
the implicit rate is known to the lessee.
c. use the implicit rate of the lessor, assuming that the implicit rate is known to the lessee.
d. use the implicit rate in all cases.
CORRECT ANSWER
c. use the implicit rate of the lessor, assuming that the implicit rate is known to the
lessee.
Question 5
Metcalf Company leases a machine from Vollmer Corp. under an agreement that meets
the criteria to be a finance lease for Metcalf. The six-year lease requires payment of
$170,000 at the beginning of each year, including $25,000 per year for maintenance,
insurance, and taxes. The incremental borrowing rate for the lessee is 10%; the lessor's
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, implicit rate is 8% and is known by the lessee. The present value of an annuity due of 1 for
six years at 10% is 4.79079. The present value of an annuity due of 1 for six years at 8% is
4.99271. Metcalf should record the lease liability as
a. $848,761.
b. $814,435.
c. $723,943.
d. $694,665.
CORRECT ANSWER
a. $848,761.
Question 6
On January 1, 2025, Dean Corporation signed a ten-year noncancelable lease for certain
machinery. The terms of the lease called for Dean to make annual payments of $200,000
at the end of each year for ten years with the title passing to Dean at the end of this
period. The machinery has an estimated useful life of 15 years and no salvage value. Dean
uses the straight-line method of depreciation for all of its fixed assets. Dean accordingly
accounted for this lease transaction as a finance lease. The lease payments were
determined to have a present value of $1,342,016 at an effective interest rate of 8%.
With respect to this lease, Dean should record for 2025
a. lease expense of $200,000.
b. interest expense of $89,468 and amortization expense of $76,136.
c. interest expense of $107,361 and amortization expense of $89,468
d. interest expense of $91,363 and amortization expense of $89,468.
CORRECT ANSWER
C. interest expense of $107,361 and amortization expense of $89,468
Question 7
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ACCOUNTING I |ACTUAL QUESTIONS AND
VERIFIED ANSWERS|BRAND NEW 2026-2027
UPDATE|GRADED A+
Question 1
Which of the following best describes current practice in accounting for leases?
a. Leases are not capitalized.
b. All long-term leases are capitalized.
c. Leases similar to installment purchases are capitalized.
d. All leases are capitalized.
CORRECT ANSWER
C.
Question 2
Lease A does not contain a bargain purchase option, but the lease term is equal to 90
percent of the estimated economic life of the leased property. Lease B does not transfer
ownership of the property to the lessee by the end of the lease term, but the lease term is
equal to 75 percent of the estimated economic life of the leased property. How should the
lessee classify these leases?
Lease A Lease B
a. Operating lease Finance lease
b. Operating lease Operating lease
c. Finance lease Finance lease
d. Finance lease Operating lease
CORRECT ANSWER
C. Finance lease Finance lease
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,Question 3
In a finance lease, the lessee records
a. amortization expense only.
b. interest expense only.
c. lease expense only.
d. amortization expense and interest expense.
CORRECT ANSWER
D. amortization expense and interest expense.
Question 4
In computing the present value of the lease payments, the lessee should
a. use its incremental borrowing rate in all cases.
b. use both its incremental borrowing rate and the implicit rate of the lessor, assuming that
the implicit rate is known to the lessee.
c. use the implicit rate of the lessor, assuming that the implicit rate is known to the lessee.
d. use the implicit rate in all cases.
CORRECT ANSWER
c. use the implicit rate of the lessor, assuming that the implicit rate is known to the
lessee.
Question 5
Metcalf Company leases a machine from Vollmer Corp. under an agreement that meets
the criteria to be a finance lease for Metcalf. The six-year lease requires payment of
$170,000 at the beginning of each year, including $25,000 per year for maintenance,
insurance, and taxes. The incremental borrowing rate for the lessee is 10%; the lessor's
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, implicit rate is 8% and is known by the lessee. The present value of an annuity due of 1 for
six years at 10% is 4.79079. The present value of an annuity due of 1 for six years at 8% is
4.99271. Metcalf should record the lease liability as
a. $848,761.
b. $814,435.
c. $723,943.
d. $694,665.
CORRECT ANSWER
a. $848,761.
Question 6
On January 1, 2025, Dean Corporation signed a ten-year noncancelable lease for certain
machinery. The terms of the lease called for Dean to make annual payments of $200,000
at the end of each year for ten years with the title passing to Dean at the end of this
period. The machinery has an estimated useful life of 15 years and no salvage value. Dean
uses the straight-line method of depreciation for all of its fixed assets. Dean accordingly
accounted for this lease transaction as a finance lease. The lease payments were
determined to have a present value of $1,342,016 at an effective interest rate of 8%.
With respect to this lease, Dean should record for 2025
a. lease expense of $200,000.
b. interest expense of $89,468 and amortization expense of $76,136.
c. interest expense of $107,361 and amortization expense of $89,468
d. interest expense of $91,363 and amortization expense of $89,468.
CORRECT ANSWER
C. interest expense of $107,361 and amortization expense of $89,468
Question 7
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