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1. A lessor with a sales-type lease involving unguaranteed residual value available to the lessor at the end of the lease term will report sales revenue in the period of inception of the lease at which of the following amounts?

a. Lease receivable plus the present value of the unguaranteed residual value.

b. The sales price of the asset, less the present value of the unguaranteed residual value.

c. The sales price of the asset, plus the present value of the unguaranteed residual value.

d. The sales revenue would be equal to the sales price of the asset.

2. A company changes the useful life of a building from 15 years and no salvage value to 25 years and no salvage value. The company would account for the effect of this change

a. By recasting previously issued financial statements.

b. In the period of change and future periods if the change affects both.

c. As a change in estimate effected by a change in accounting principle.

d. As a change in accounting principle.

3. A&O Corporation sold equipment for $85,000. The cost of the equipment was $100,000 and the book value was $82,000. Under the indirect method, to determine net cash flow from operations, A&O would

a. Subtract from net income a $3,000 gain from sale of equipment

b. Add back to net income a $15,000 loss from sale of equipment

c. Add back to net income a $3,000 loss from sale of equipment

d. Subtract from net income a $15,000 gain from sale of equipment.

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