Lessee Leased Some Land and Buildings from Lessor

question 89

Multiple Choice

Lessee leased some land and buildings from Lessor.There was no transfer of ownership and no bargain purchase option.If the fair value of the land is less than a certain percentage of the total fair value of the leased property at the inception of the lease, both the lessee and the lessor may consider the land and buildings as a single unit.What is that percentage?

• A)10%
• B)20%
• C)25%
• D)50%

---

Definitions:

Short-Term Pricing

Strategies or tactics a business uses to price goods and services for a relatively short period to meet specific business objectives.

Absorption Costing

A system of accounting that includes every manufacturing expense, from direct materials and labor to variable and fixed overheads, into the calculation of a product’s cost.

Variable Costing

A method of inventory costing that includes only variable production costs—direct materials, direct labor, and variable manufacturing overhead—in the cost of goods sold.

Absorption Costing

An accounting method that includes all direct costs and fixed and variable overhead costs in the cost of a product.