Practice Test Geeks(CLP) Certified Leasing Professional Practice Test
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Lease Law, Tax, and Accounting Flashcards

7 cards from real CLP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Lease Law, Tax, and Accounting flashcards as text

  1. Under the Uniform Commercial Code (UCC) Article 2A, a lease is classified as a 'finance lease' when which condition is met?

    Answer: The lessee selects the goods and the lessor acquires them solely to lease to that lessee

    Under UCC Article 2A, a finance lease exists when the lessee selects the goods and the lessor acquires them solely to lease to that lessee, with the lessee receiving a copy of the supply contract.

  2. Which IRS form is primarily used by lessors to report rental income from personal property leases?

    Answer: Schedule E (Form 1040)

    Lessors report rental income from personal property leases on Schedule E (Supplemental Income and Loss) of Form 1040.

  3. What does the term 'hell-or-high-water' clause mean in a lease agreement?

    Answer: The lessee's payment obligation is unconditional regardless of equipment performance

    A hell-or-high-water clause makes the lessee's rent payment obligation absolute and unconditional, regardless of any defects, damage, or failure of the leased equipment.

  4. Under ASC 842, a lessee must recognize a right-of-use (ROU) asset and lease liability on the balance sheet for which lease type?

    Answer: Both finance and operating leases with terms exceeding 12 months

    ASC 842 requires lessees to recognize ROU assets and lease liabilities on the balance sheet for both finance and operating leases with terms exceeding 12 months.

  5. A lessee returns leased equipment in damaged condition beyond normal wear and tear. Which legal doctrine most directly governs the lessee's liability?

    Answer: Duty to maintain and return in good condition

    Lessees have a duty to maintain leased property and return it in good condition, making them liable for damage beyond ordinary wear and tear.

  6. For tax purposes, which factor is NOT part of the IRS's 'true lease' test used to distinguish a lease from a conditional sale?

    Answer: The lessee makes a substantial equity contribution at inception

    A lessee equity contribution is not part of the IRS true lease test; the key factors are the lessor's residual interest, risk retention, and whether the lessee holds a bargain purchase option.

  7. Which accounting treatment applies to the initial direct costs incurred by a lessee when entering into an operating lease under ASC 842?

    Answer: Added to the ROU asset and amortized over the lease term

    Under ASC 842, a lessee adds initial direct costs to the measurement of the ROU asset and amortizes them over the lease term.