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CPA BAR | Area II | Leases

Practice lease classification, lease liabilities, and right-of-use assets. Review a worked explanation after every question.

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Leases

Question 1 of 2

Leases. Question 1 of 2. A lessor leases equipment under a four year term. Title transfers to the lessee automatically at the end of the term. The present value of the lease payments is 35% of the equipment's fair value, and the lease term covers 15% of the equipment's remaining economic life. How should the lessor classify this lease?

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Leases

Correct answer: D

Sales-type, because title transfers to the lessee by the end of the lease term

Worked reasoning

Once title transfers automatically at the end of a lease, that single yes answers the whole question immediately, the other four don't need to be run at all. The present value figure and the economic-life figure here are both real numbers, and both weak. It's tempting to average them against the title-transfer fact, or weigh one against the other. That isn't how this works. Once one of the five questions comes back yes, the other four don't need checking.

Guidon CPA BAR practice questions

This product provides preparation for the Business Analysis and Reporting section of the Uniform Certified Public Accountant (CPA) exam.

  • Revenue recognition

    25questions

    • Distinct performance obligations
    • Transaction price allocation
    • When to recognize revenue

  • Leases

    55questions

    • Lease identification and classification
    • Lease liabilities and right-of-use assets
    • Lessee and lessor accounting

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80 questions. Both topics included.

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  • Worked explanations, including why the wrong answers are wrong
  • Practice history and topic standing to see what needs more work
  • New Area II topics included during your 12-month access period
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See what this topic actually tests.

Leases sit in Area II, Technical Accounting and Reporting, which is weighted at 35–45% of the BAR exam, and are tested at the application and analysis level rather than recall.

The questions cover identifying whether a contract contains a lease, lessee classification under the five criteria, initial and subsequent measurement of the lease liability and right-of-use asset, practical expedients, lessor accounting, and sale-leaseback transactions. Where FAR asks you to record a lease you're told is a finance lease, BAR gives you the facts and asks you to decide, then work out what changes on the balance sheet when a term is modified or an option becomes reasonably certain.

More Area II topics are in development.

Next we’re adding more Area II topics, and business combinations and stock compensation are in progress.

80 questions today: 25 on revenue recognition, 55 on leases. As of October 2026.

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Free Leases diagnostic Revenue recognition — included