What Is the Implicit Rate

question 76

Multiple Choice

What is the implicit rate?

• A)The interest rate that the lessor would have to pay on a similar lease or loan.
• B)The interest rate that the lessee would have to pay on a similar lease or loan.
• C)The risk adjusted interest rate from the cash flow stream expected by the lessor.
• D)The risk adjusted interest rate from the cash flow stream expected by the lessee.

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Definitions:

Production Activity

The process of transforming raw materials into finished goods or services.

Work in Process

Goods that are in various stages of production within a manufacturing process but are not yet completed products.

FIFO Method

"First-In, First-Out," an accounting method for valuing inventory that assumes the first items purchased or produced are the first ones sold.

Cost Reconciliation

A process of verifying and adjusting the cost of a product or project by comparing budgeted or standard costs to actual incurred costs.