Operating And Finance Leases (Lessee) Practice Test

A for-profit lessee has an existing 4-year operating lease under ASC 842 with fixed payments of $30,000 at each year-end. At the end of Year 1, the lessee reassesses the lease term due to a significant event and concludes it is now reasonably certain to exercise an option that extends the lease by 1 year; the lessee remeasures the lease liability using an updated discount rate. The remeasurement increases the lease liability by $18,000. Which financial statement account is affected by the offset to the $18,000 increase in the lease liability at the remeasurement date?

On January 1, Year 1, a for-profit lessee enters into a 5-year finance lease under ASC 842. The present value of lease payments at commencement is $300,000, and there are no initial direct costs, incentives, or prepayments. At December 31, Year 1, after recording the Year 1 payment, the lessee determines that the lease liability carrying amount is $255,000. The lessee amortizes the right-of-use asset on a straight-line basis over the 5-year lease term. What should the carrying amount of the right-of-use asset be at December 31, Year 1 (ignoring any impairment)?