Which of the Following Amortization Policies Is Correct for a Capital

question 112

Multiple Choice

Which of the following amortization policies is correct for a capital lease of both land and buildings that transfers title or contains a bargain purchase option?

• A)The total capitalized cost of the lease less any expected residual value is allocated over the expected economic life of the assets.
• B)The total capitalized cost of the lease less any expected residual value is allocated over the lease term.
• C)An amount is assigned to Leased Buildings that is amortized over the lease term, and the amount assigned to Leased Land is not amortized.
• D)An amount is assigned to Leased Buildings that is amortized over the expected economic life of the asset, and the amount assigned to Leased Land is not amortized.

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Definitions:

Common Stock

Corporate stock that does not convey any preferences to its holders.

Corporation

A legal entity formed by issuing stock to investors, who are the owners of the corporation.

Preferences

Preferences typically involve decisions or policies that give priority or advantage to particular individuals or groups, often seen in legal contexts such as bankruptcy.

Corporate Veil

A legal concept separating the actions of a corporation from its shareholders, protecting them from being personally liable for the company's debts and obligations.