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CLFP EXAM LATEST 2026 ACTUAL EXAM TEST
BANK| FINANCIAL AND TAX ACCOUNTING FOR
LEASES EXAM WITH COMPLETE 350 REAL EXAM
QUESTIONS AND CORRECT VERIFIED ANSWERS/
ALREADY GRADED A+ (BRAND NEW!!)
What is Renewal or Extension of a Lease? - ANSWER - The
continuation of a lease agreement beyond the original term, including a
new lease where the lessee continues to use the same property.
What is Sale-Leaseback Accounting? - ANSWER - A method of
accounting for transactions in which the seller-lessee records the sale ,
removes the property and related liabilities from its balance sheet,
recognizes gain or loss from the sale and classifies the leaseback in
accordance with proper lease accounting
What is Unguaranteed Residual Value? - ANSWER - The estimated
residual value of the leased property exclusive of any portion guaranteed
by the lessee or by a third party unrelated to the lessor. If the guarantor is
related to the lessor, the residual value is considered unguaranteed
What are the three types of Lessor Financial Statements classification? -
ANSWER - 1.) Operating
2.) Direct financing (capital lease)
3) Sale-type (capital lease)
pg. 1
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4) If lender is lending cash - typically capital lease
5) If lender is lending assets - typically operating lease
What dictates the proper treatment of a lease on the lessors books? -
ANSWER - ASC 840. If any of the following are met at time of lease
inception, capital lease treatment is required.
1). transfer of ownership at lease end;
2.) bargain purchase option;
3.) lease term >= 75% property economic useful life
4.) PV of payments > 90% of fair value (less tax credits)
If a criteria of ASC 840 is met, what additional criteria must be met to
classify as a capital lease? - ANSWER - In addition to meeting an ASC
840 criteria, both of the following must be met to classify as capital
lease:
1). collectibility is reasonably certain;
2.) No important uncertainties surround the amount of the non-
reimbursable costs to be incurred by the lessor under the lease.
How should manufacturer account for a sale-type lease? - ANSWER -
1.) take sale profit, or
2.) capitalize the expense as IDC
3.) Can't to both
pg. 2
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How should a lessor account for a direct finance lease? - ANSWER -
Net investment (book value) in the lease is recorded as an asset on the
balance sheet:
+Gross Investment
- Unearned Income
= Net Investment
What is Gross Investment? - ANSWER - The sum of all the min. lease
payments plus the un-guaranteed residual value.
What is Unearned Income? - ANSWER - Is the gross investment less
asset cost.
How is debt accounted for by lessor in a direct finance lease? -
ANSWER - Debt incurred by lessor to acquire equipment remains on the
balance sheet as long term liability
How is Unearned Income accounted for on the Lessor Income
Statement? - ANSWER - Unearned income is amortized over the lease
term so as to produce a constant periodic rate of return on the net
investment.
What is Initial Indirect Cost (IDC)? - ANSWER - Could include fees
paid to vendor/broker, internal sales commissions and other expenses
incurred by lessor associated with transaction.
pg. 3
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How is IDC accounted for on Lessor financial statements? - ANSWER -
IDC incurred by lessor are capitalized, reduced from expense and
amortized on a straight-line basis over the term of the lease to offset
income.
How should a Lessor account for residual values? - ANSWER - 1.)
review residual values annually
2.) If decline, determine if temporary or permanent.
3.) if permanent, value is to be revised and loss in the investment during
the current period.
4.) Residual values are never adjusted up, even in cases of past losses.
What are a lessor's required financial disclosures regarding direct
finance leases? - ANSWER - 1.) general description
2.) Future min. lease payments to be received (net of executory, non
collectible expenses and profit)
3.) Unguaranteed residual value
4.) Unearned income
5.) Future minimum lease payments for each of the next five years
6.) Amount of unearned income included in income to offset initial
direct cost charged against income for each period income statement
presented
7.) Total contingent rental included in income for each period income
statement presented
pg. 4
CLFP EXAM LATEST 2026 ACTUAL EXAM TEST
BANK| FINANCIAL AND TAX ACCOUNTING FOR
LEASES EXAM WITH COMPLETE 350 REAL EXAM
QUESTIONS AND CORRECT VERIFIED ANSWERS/
ALREADY GRADED A+ (BRAND NEW!!)
What is Renewal or Extension of a Lease? - ANSWER - The
continuation of a lease agreement beyond the original term, including a
new lease where the lessee continues to use the same property.
What is Sale-Leaseback Accounting? - ANSWER - A method of
accounting for transactions in which the seller-lessee records the sale ,
removes the property and related liabilities from its balance sheet,
recognizes gain or loss from the sale and classifies the leaseback in
accordance with proper lease accounting
What is Unguaranteed Residual Value? - ANSWER - The estimated
residual value of the leased property exclusive of any portion guaranteed
by the lessee or by a third party unrelated to the lessor. If the guarantor is
related to the lessor, the residual value is considered unguaranteed
What are the three types of Lessor Financial Statements classification? -
ANSWER - 1.) Operating
2.) Direct financing (capital lease)
3) Sale-type (capital lease)
pg. 1
,2|Page
4) If lender is lending cash - typically capital lease
5) If lender is lending assets - typically operating lease
What dictates the proper treatment of a lease on the lessors books? -
ANSWER - ASC 840. If any of the following are met at time of lease
inception, capital lease treatment is required.
1). transfer of ownership at lease end;
2.) bargain purchase option;
3.) lease term >= 75% property economic useful life
4.) PV of payments > 90% of fair value (less tax credits)
If a criteria of ASC 840 is met, what additional criteria must be met to
classify as a capital lease? - ANSWER - In addition to meeting an ASC
840 criteria, both of the following must be met to classify as capital
lease:
1). collectibility is reasonably certain;
2.) No important uncertainties surround the amount of the non-
reimbursable costs to be incurred by the lessor under the lease.
How should manufacturer account for a sale-type lease? - ANSWER -
1.) take sale profit, or
2.) capitalize the expense as IDC
3.) Can't to both
pg. 2
,3|Page
How should a lessor account for a direct finance lease? - ANSWER -
Net investment (book value) in the lease is recorded as an asset on the
balance sheet:
+Gross Investment
- Unearned Income
= Net Investment
What is Gross Investment? - ANSWER - The sum of all the min. lease
payments plus the un-guaranteed residual value.
What is Unearned Income? - ANSWER - Is the gross investment less
asset cost.
How is debt accounted for by lessor in a direct finance lease? -
ANSWER - Debt incurred by lessor to acquire equipment remains on the
balance sheet as long term liability
How is Unearned Income accounted for on the Lessor Income
Statement? - ANSWER - Unearned income is amortized over the lease
term so as to produce a constant periodic rate of return on the net
investment.
What is Initial Indirect Cost (IDC)? - ANSWER - Could include fees
paid to vendor/broker, internal sales commissions and other expenses
incurred by lessor associated with transaction.
pg. 3
, 4|Page
How is IDC accounted for on Lessor financial statements? - ANSWER -
IDC incurred by lessor are capitalized, reduced from expense and
amortized on a straight-line basis over the term of the lease to offset
income.
How should a Lessor account for residual values? - ANSWER - 1.)
review residual values annually
2.) If decline, determine if temporary or permanent.
3.) if permanent, value is to be revised and loss in the investment during
the current period.
4.) Residual values are never adjusted up, even in cases of past losses.
What are a lessor's required financial disclosures regarding direct
finance leases? - ANSWER - 1.) general description
2.) Future min. lease payments to be received (net of executory, non
collectible expenses and profit)
3.) Unguaranteed residual value
4.) Unearned income
5.) Future minimum lease payments for each of the next five years
6.) Amount of unearned income included in income to offset initial
direct cost charged against income for each period income statement
presented
7.) Total contingent rental included in income for each period income
statement presented
pg. 4
