CLFP
PRACTICE EXAM QUESTIONS WITH
CORRECT DETAILED ANSWERS |
ALREADY GRADED A+<RECENT
vERSION>
1) Bailment - ANSWER Delivery of property from a bailor to a bailee with an
obligation by the bailee to return it.
2) Book Accounting - ANSWER Method of accounting used to report a company's
financial activity.
3) Bundle Lease - ANSWER A lease that includes additional services such as
maintenance, insurance and property tax that are paid by the lessor.
4) Business Lease - ANSWER A lease in which the lessee has entered in to it for
business purposes.
5) Capital Lease - ANSWER A lease that has the characteristics of a purchase
agreement and meets the FASB 13 requirements.
6) Chattel Mortgage - ANSWER A lien placed on personal property for the purposes
of securing a debt.
7) Closed End Lease - ANSWER A lease that DOES NOT contain a purchase or
renewal option. Lessee HAS TO RETURN the equipment.
,8) Conditional Sales Contract - ANSWER a. financing of property, title which will
pass only when the buyer has met their obligations. b. lessee is treated as the owner of
the asset for IRS (55-540; IF PETS), but, clouds title by a lien until all terms are met.
9) Consumer Lease - ANSWER A lease in which the lessee enters to acquire property
for personal, family or household use.
10) Direct Financing Lease - ANSWER A capital lease that DOES NOT give rise to
manufacturers or dealer's profit (or loss) to the lessor.
11) Discounted Lease - ANSWER A lease in which the payment stream is assigned by
the lessor to a funding source in return for immediate payment of the PV of the stream
of payments.
12) Dry Lease - ANSWER A NET LEASE, traditionally for aircraft or marine vessels,
which requires the LESSEE TO PROCURE all personnel, fuel and provisions
necessary to operate the craft.
13) Factoring - ANSWER The assignment by a lessee of accounts receivable to a
lessor as collateral for a specified term and payment amount resulting in liquidity to
improve cash flow or make capital acquisitions.
14) Finance Lease - ANSWER A net lease, used to finance the use of property for the
majority of its useful life.
15) Full Payout Lease - ANSWER A lease in which the LESSOR RECOVERS,
through the lease payments, ALL COSTS incurred in the lease plus an acceptable rate
of return, WITHOUT reliance on the leased property's RESIDUAL value.
16) Installment Loan - ANSWER Any loan, the terms of which call for regular or
irregular periodic payments, the sum of which will repay the debt and interest.
17) Lease Intended as security - ANSWER A transaction in which the form is a lease,
but the substance is a conditional sale contract or a loan with a security agreement on
the property.
,18) Leveraged Lease - ANSWER Any lease involving, at minimum, a lessee, a lessor
and a funding source from whom the lessor borrows a significant portion of the cost
of equipment and holds an (minimum of 20%) equity position.
19) Master Lease - ANSWER A document under which a lessee may add additional
schedules representing property later acquired, subject to the same general terms and
conditions.
20) Money-over-Money Lease - ANSWER A NON-TAX or CSC where the title is
intended to pass to the lessee at the end of the lease term.
21) Municipal Lease - ANSWER A lease to a municipality or government agency,
which isn't typically a true lease and from which the interest earnings to the lessor are
tax exempt.
22) Net Lease - ANSWER A lease in which all costs associated with use, maintenance,
insurance, and property taxes are PAID separately BY the LESSEE (i.e. not included
in rental payment).
23) Non-tax Lease - ANSWER 1. Any lease in which the lessee is, or will
automatically become, the owner during or at lease end, and, is entitled to all of the
tax benefits of ownership (e.g. money-over-money, CSC, purchase money security
agreement, or lease intended as security).
24) Open-End Lease - ANSWER A lease in which the LESSEE GUARANTEES the
future RESIDUAL value of the property to be realized by the lessor at lease end.
25) Operating Lease - ANSWER Any lease that has the characteristics of a usage
agreement and also fails to meet any of the FASB 13 rules for a capital lease.
26) Purchase Money Security Interest - ANSWER A security interest granted in
property to secure the payment of the purchase price of the property.
, 27) Sale-Leaseback - ANSWER A transaction under which the lessee sells the
property to be leased to the lessor and then leases back the same property. (considered
a lease in its form, but substantively more like a loan or chattel mortgage).
28) Sales Type Lease - ANSWER A capital lease that GIVES rise to manufacturer's or
dealer's PROFIT to the lessor.
29) Section 38 Property - ANSWER Any asset on which depreciation may be taken, as
defined by the IRS.
30) Section 179 - ANSWER IRS code allowing taxpayer to deduct certain types of
property as a direct expense against income rather than depreciating the asset over its
tax life.
31) Service Lease (Gross or Maintenance Lease) - ANSWER A lease in which the
lessor provides such services as maintenance for the leased property. The cost of
services may be built into the payments or paid separately.
32) Single Investor Lease - ANSWER A lease under which the lessor is fully at risk
for all funds used to purchase the equipment and is a 2 party transaction, lessor +
lease.
33) Term Loan - ANSWER Any loan with a fixed maturity date.
34) Trac Lease - ANSWER A lease on automobiles, trucks or trailers which may be a
true lease for IRS, despite, that it contains a Terminal Rental Adjustment Clause
(TRAC) which guarantees the lessor the residual value. The lessor must: (a) maintain
a minimum at-risk position equal to the borrowings used to fund the vehicle (b)
Obtain a lessee certification that the lessee will use the vehicle more than 50% for
business.
35) True Lease (Tax Lease) - ANSWER A lease, which for tax purposes, fails to meet
all of the tests for a conditional sale contract under IRS ruling 55-540, therefore, the
lessor qualifies for the tax benefits of ownership and lessee to claim the entire amount
of the lease payment as a tax deduction.
PRACTICE EXAM QUESTIONS WITH
CORRECT DETAILED ANSWERS |
ALREADY GRADED A+<RECENT
vERSION>
1) Bailment - ANSWER Delivery of property from a bailor to a bailee with an
obligation by the bailee to return it.
2) Book Accounting - ANSWER Method of accounting used to report a company's
financial activity.
3) Bundle Lease - ANSWER A lease that includes additional services such as
maintenance, insurance and property tax that are paid by the lessor.
4) Business Lease - ANSWER A lease in which the lessee has entered in to it for
business purposes.
5) Capital Lease - ANSWER A lease that has the characteristics of a purchase
agreement and meets the FASB 13 requirements.
6) Chattel Mortgage - ANSWER A lien placed on personal property for the purposes
of securing a debt.
7) Closed End Lease - ANSWER A lease that DOES NOT contain a purchase or
renewal option. Lessee HAS TO RETURN the equipment.
,8) Conditional Sales Contract - ANSWER a. financing of property, title which will
pass only when the buyer has met their obligations. b. lessee is treated as the owner of
the asset for IRS (55-540; IF PETS), but, clouds title by a lien until all terms are met.
9) Consumer Lease - ANSWER A lease in which the lessee enters to acquire property
for personal, family or household use.
10) Direct Financing Lease - ANSWER A capital lease that DOES NOT give rise to
manufacturers or dealer's profit (or loss) to the lessor.
11) Discounted Lease - ANSWER A lease in which the payment stream is assigned by
the lessor to a funding source in return for immediate payment of the PV of the stream
of payments.
12) Dry Lease - ANSWER A NET LEASE, traditionally for aircraft or marine vessels,
which requires the LESSEE TO PROCURE all personnel, fuel and provisions
necessary to operate the craft.
13) Factoring - ANSWER The assignment by a lessee of accounts receivable to a
lessor as collateral for a specified term and payment amount resulting in liquidity to
improve cash flow or make capital acquisitions.
14) Finance Lease - ANSWER A net lease, used to finance the use of property for the
majority of its useful life.
15) Full Payout Lease - ANSWER A lease in which the LESSOR RECOVERS,
through the lease payments, ALL COSTS incurred in the lease plus an acceptable rate
of return, WITHOUT reliance on the leased property's RESIDUAL value.
16) Installment Loan - ANSWER Any loan, the terms of which call for regular or
irregular periodic payments, the sum of which will repay the debt and interest.
17) Lease Intended as security - ANSWER A transaction in which the form is a lease,
but the substance is a conditional sale contract or a loan with a security agreement on
the property.
,18) Leveraged Lease - ANSWER Any lease involving, at minimum, a lessee, a lessor
and a funding source from whom the lessor borrows a significant portion of the cost
of equipment and holds an (minimum of 20%) equity position.
19) Master Lease - ANSWER A document under which a lessee may add additional
schedules representing property later acquired, subject to the same general terms and
conditions.
20) Money-over-Money Lease - ANSWER A NON-TAX or CSC where the title is
intended to pass to the lessee at the end of the lease term.
21) Municipal Lease - ANSWER A lease to a municipality or government agency,
which isn't typically a true lease and from which the interest earnings to the lessor are
tax exempt.
22) Net Lease - ANSWER A lease in which all costs associated with use, maintenance,
insurance, and property taxes are PAID separately BY the LESSEE (i.e. not included
in rental payment).
23) Non-tax Lease - ANSWER 1. Any lease in which the lessee is, or will
automatically become, the owner during or at lease end, and, is entitled to all of the
tax benefits of ownership (e.g. money-over-money, CSC, purchase money security
agreement, or lease intended as security).
24) Open-End Lease - ANSWER A lease in which the LESSEE GUARANTEES the
future RESIDUAL value of the property to be realized by the lessor at lease end.
25) Operating Lease - ANSWER Any lease that has the characteristics of a usage
agreement and also fails to meet any of the FASB 13 rules for a capital lease.
26) Purchase Money Security Interest - ANSWER A security interest granted in
property to secure the payment of the purchase price of the property.
, 27) Sale-Leaseback - ANSWER A transaction under which the lessee sells the
property to be leased to the lessor and then leases back the same property. (considered
a lease in its form, but substantively more like a loan or chattel mortgage).
28) Sales Type Lease - ANSWER A capital lease that GIVES rise to manufacturer's or
dealer's PROFIT to the lessor.
29) Section 38 Property - ANSWER Any asset on which depreciation may be taken, as
defined by the IRS.
30) Section 179 - ANSWER IRS code allowing taxpayer to deduct certain types of
property as a direct expense against income rather than depreciating the asset over its
tax life.
31) Service Lease (Gross or Maintenance Lease) - ANSWER A lease in which the
lessor provides such services as maintenance for the leased property. The cost of
services may be built into the payments or paid separately.
32) Single Investor Lease - ANSWER A lease under which the lessor is fully at risk
for all funds used to purchase the equipment and is a 2 party transaction, lessor +
lease.
33) Term Loan - ANSWER Any loan with a fixed maturity date.
34) Trac Lease - ANSWER A lease on automobiles, trucks or trailers which may be a
true lease for IRS, despite, that it contains a Terminal Rental Adjustment Clause
(TRAC) which guarantees the lessor the residual value. The lessor must: (a) maintain
a minimum at-risk position equal to the borrowings used to fund the vehicle (b)
Obtain a lessee certification that the lessee will use the vehicle more than 50% for
business.
35) True Lease (Tax Lease) - ANSWER A lease, which for tax purposes, fails to meet
all of the tests for a conditional sale contract under IRS ruling 55-540, therefore, the
lessor qualifies for the tax benefits of ownership and lessee to claim the entire amount
of the lease payment as a tax deduction.
