Given Its Importance,how Does the Accounting Profession Determine Whether a Lease

question 50

Multiple Choice

Given its importance,how does the accounting profession determine whether a lease is an operating lease or a purchase capital lease?

• A)by observing what ledger account the transaction was recorded in
• B)by determining the intentions of the lessee
• C)based on whether the item being leased is a capital asset or not
• D)based on whether title is likely to pass at the end of the lease period
• E)by asking whether the asset is to be used short-term or long-term

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Definitions:

Revenue Conditions

Refers to the factors that impact the revenue generation capabilities or situations of a business.

Liquidity Ratio

Financial metrics used to determine a company’s ability to pay off its short-term debts obligations with its liquid assets.

Generate Cash

The processes and strategies employed by businesses to increase liquidity and ensure sufficient funds are available for operational needs and investments.

Bill Payments

The process of settling financial obligations for services rendered or goods provided.