Which of the Following Facts Would Require a Lessee to Classify

question 14

Multiple Choice

Which of the following facts would require a lessee to classify a lease as a capital lease?

• A)The lease term is 85% of the estimated economic life of the leased property.
• B)The present value of the minimum lease payments is 85% of the fair market value of the leased property to the lessor, less any investment tax credit accruing to the lessor.
• C)The lease contains a purchase option.
• D)The lease does not transfer ownership of the leased property.

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Definitions:

Owned Subsidiary

A company whose majority shares or all are held by another company, making it a controlled entity within a larger corporate structure.

Foreign Subsidiaries

Companies that are owned or controlled by a parent company but are located in a different country.

Current Rate Method

A method of foreign currency translation where all financial statement line items are translated at the current exchange rate in effect at the reporting date.

GAAP

Generally Accepted Accounting Principles, a standardized set of accounting rules, standards, and procedures used in the accounting industry primarily in the United States.