The Following Are Indicators in the Terms of a Lease

question 11

Multiple Choice

The following are indicators in the terms of a lease that cause it to be treated as a capital lease.The indicators are: (1) Losses clue to cancellation of the lease by the lessee are borne by the lessee.
(2) Gains and losses due to changes in the fair value of the leased asset are captured by the lessee.
These indicators are criteria that trigger lease capitalization under
$\begin{array}{lll}&\text {G A A P}&\text { IFRS }\\\text { I. } & \text { Yes } & \text { Yes } \\\text { II. } & \text { Yes } & \text { No } \\\text { III. } & \text { No } & \text { Yes } \\\text { IV. } & \text { No } & \text { No }\end{array}$

• A)I
• B)II
• C)III
• D)IV

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Definitions:

Professional Contract

A written agreement detailing the terms of engagement between a professional service provider and their client or employer.

Accounting Records

Documents that businesses use to track their financial transactions and positions, essential for preparing financial statements and ensuring compliance.

Fair Value

Fair Value is the price at which an asset would be bought or sold in a transaction between willing parties, other than in a liquidation scenario.

Accumulated Depreciation

The total amount of depreciation for a fixed asset that has been charged to expense since the asset was acquired and put into use.