F7 (FR) – Chapter 12 – PART B – CBE MCQs – ACCA

These are ACCA F7 (FR) Financial Reporting MCQs for Part-B of the Syllabus “Accounting for transactions in financial statements”.

These multiple-choice questions (MCQs) are designed to help ACCA F7 students to better understand the exam format. We aim to instill in students the habit of practicing online for their CBE exams. By doing so, students can reduce exam stress and prepare more effectively.

Please note:

  • Students should not attempt these MCQs until they have finished the entire chapter.
  • All questions are compulsory, so please do not skip any.

We hope that these MCQs will be a valuable resource for students preparing for the ACCA F7 (FR) exam.

INFORMATION ABOUT THESE CBE MCQs Test/Quiz

Course:ACCA – Association of Chartered Certified Accountants
Fundamental Level:Applied Skills
Subject:Financial Reporting
Paper:F7 – FR
Chapter and Topic12 – Leasing
Syllabus Area:B – “Accounting for transactions in financial statements”
Questions Type:CBE MCQs
Exam Section:Section A

Syllabus Area

These Multiple Choice Questions (MCQs) cover the Syllabus Area Part-B of the Syllabus; “Accounting for transactions in financial statements” of ACCA F7 (FR) Financial Reporting Module.

Time

These MCQs are not time-bound. Take your time and solve them without stress. Pay proper attention and focus. Do not rush or hesitate

Result

Students will get their F7 CBE MCQs Test results after they finish the entire test. They will also be able to see the correct and incorrect answers, as well as explanations for the incorrect questions.

Types of Questions

MCQs: Choose one from the given options.
Multiple choice: Choose all those answers which seem correct/ or incorrect to you, as per the requirement of the question. Keep your eye on the wording “(select all those which are correct/ or incorrect)“.
Drop-down: Select from the list provided.
Type numbers: Type your answer in numbers as per the requirement of the question.

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F7 (FR) - Chapter 12 - Part B - MCQs - Leasing

Course: ACCA - Association of Chartered Certified Accountants
Subject:
F7 (FR) - Financial Reporting
Syllabus Area: B - Accounting for transactions in financial statements
Chapter: 12 - Leasing
Exam Section: Section A
Questions type: MCQs
Time: No Time Limit

INSTRUCTIONS

  1. If you are using mobile, turn on the mobile rotation and solve the MCQs on wide screen for better experience.

REQUEST

  1. Please rate the quiz and give us feedback once you completed the quiz.
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1 / 12

Which of the following statements are the indicators that a contract is a lease under IFRS 16 Leases?

  1. The lessee obtains substantially all of the economic benefits from use of the asset
  2. Ownership in the asset is transferred at the end of the lease term
  3. The contract relates to an identified asset
  4. If it suits them to do so, the lessor can substitute an identical asse

2 / 12

On 1 October 20X3, Fresco Co acquired an item of plant under a five-year lease agreement. The lease required an immediate deposit of $2 million with five payments of $6 million paid annually in arrears commencing on 30 September 20X4. The present value of the future lease payments was $22,746,000. The agreement had an implicit finance cost of 10% per annum.

What will be the current liability in Fresco Co's statement of financial position as at 30 September 20X4?

3 / 12

At what amount does IFRS 16 Leases require a lessee to measure a right-of-use asset acquired under a lease?

4 / 12

On 1 January 20X6 Fellini Co hired a machine under a four year lease. A deposit of $700,000 was payable on the commencement of the lease on 1 January 20X6. The present value of the future lease payments was $1,871,100. A further 3 instalments of $700,000 are payable annually in advance. The interest rate implicit in the lease is 6%.

What amount will appear under non-current liabilities in respect of this lease in the statement of financial position of Fellini Co at 31 December 20X6? [Answers to nearest $'000]

5 / 12

Jetsam Co entered into a lease for an item of plant on 1 April 20X0 which required payments of $15,000 to be made annually in arrears. The present value of the future lease payments was estimated to be $100,650 at the inception of the lease and the rate of interest implicit in the lease was 8%. Both the lease term and the plant's estimated useful life was ten years.

What is the total charge to appear in the statement of profit or loss in respect of the lease for the year ended 31 December 20X0?

6 / 12

Pennyroyal Co acquired an item of plant under a lease on 1 April 20X5. An initial payment of $2,000,000 is paid on 1 April 20X5 and the present value of the future lease payments, is $7,092,000. Pennyroyal Co will make four further annual payments of $2 million paid in advance commencing 1 April 20X6. the useful life of the plant is deemed to be eight years. Pennyroyal Co will obtain legal title of the asset following the final payment.

The interest rate implicit in the lease is 5% per annum.

What is the total charge to appear in the statement of profit or loss in respect of this lease for the year ended 31 March 20X6?

7 / 12

The objective of IFRS 16 Leases is to prescribe the appropriate accounting treatment and required disclosures in relation to leases.

Which TWO of the following are among the criteria set out in IFRS 16 for an arrangement to be classified as a lease?

8 / 12

Tourmalet Co sold an item of plant for $50 million on 1 April 20X4. The plant had a carrying amount of $40 million at the date of sale, which was charged to cost of sales. On the same date, Tourmalet Co entered into an agreement to lease back the plant for the next five years (being the estimated remaining life of the plant) at a cost of $14 million per annum payable annually in arrears. An arrangement of this type is normally deemed to have a financing cost of 10% per annum. Tourmalet Co retained the rights to direct the use of, and retain substantially all the remaining benefits from, the plant.

Using the drop down box, select what amount will be shown as income from this transaction in the statement of profit or loss for the year ended 30 September 20X4?

9 / 12

A sale and leaseback transaction involves the sale of an asset and the leasing back of the same asset. If the arrangement meets the IFRS 15 Revenue from Contracts with Customers criteria to be recognised as a sale, how should any 'profit' on the sale be treated?

10 / 12

During the year ended 30 September 20X4 Hyper Co entered into the following transactions:

On 1 October 20X3 Hyper Co acquired under a lease to obtain a right of use asset which was initially measured at $340,000. Under the terms of the lease, a payment in advance of $90,000 was made on commencement of the lease, being the first of five equal annual payments. The right of use asset has a five-year useful life. The lease has an implicit interest rate of 10%..

On 1 August 20X4, Hyper Co made a payment of $18,000 for a nine-month lease of an item of excavation equipment. Hyper wishes to utilise the exceptions available under IFRS 16 Leases.

What amount in total would be charged to Hyper Co's statement of profit or loss for the year ended 30 September 20X4 in respect of the above transactions? $_______

Note. You are not required to put $ sign nor any coma. (e.g. 1000)

11 / 12

On 1 January 20X6 Platinum Co entered into a lease agreement. The initial lease liability was $360,200 and a deposit of $120,000 was payable on 1 January 20X6 with three further instalments of $100,000 payable on 31 December 20X6, 31 December 20X7 and 31 December 20X8. The rate of interest implicit in the lease is 12%.

What will be the amount of the finance charge arising from this lease which will be charged to profit or loss for the year ended 31 December 20X7?

12 / 12

Pebworth Co acquired an item of plant under a lease on 1 April 20X7. The present value of the future lease payments and the carrying amount of the right-of-use asset was $15,462,000 and three rental payments of $6 million per annum are due to be paid in arrears on 31 March each year. The useful life of the plant is deemed to be five years. There is no option to buy the asset at the end of the lease term.

The interest rate implicit in the lease is 8% per annum.

What is the total charge to profit or loss in respect of this lease at 31 March 20X8?

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