Which of the Following Is Used to Determine Whether the Lessor

question 120

Multiple Choice

Which of the following is used to determine whether the lessor maintains effective control of the leased asset?

• A)Is the lease term greater than 90% of the asset's estimated life?
• B)Does the sum of the payments equal or exceed substantially all of the fair value of the underlying asset?
• C)Does the lease provide for an opportunity for the lessor to re-purchase the leased asset during the lease term at fair market value?
• D)Does the lease transfer ownership of the leased asset to the lessee by the end of the lease term?

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Definitions:

Direct Labor-Hours

An accounting term indicating the hours of work performed by employees directly involved in the creation of goods or services.

Variable Manufacturing Overhead

Costs that fluctuate with production volume, such as indirect materials or utilities, associated specifically with the manufacturing process.

Unit Product Cost

The total cost associated with manufacturing a single unit of product, including direct materials, labor, and overhead expenses.

Predetermined Overhead Rate

A rate used to apply overhead costs to products, calculated before the accounting period begins based on estimated costs and activity levels.