Which of the Following Would Indicate That the Lessee Should

question 7

Multiple Choice

Which of the following would indicate that the lessee should not classify a lease as a finance lease under ASC 842?

• A) The fair value of the leased asset is $100,000 and the present value of the minimum lease payments is $95,000.
• B) The lease provides for no unguaranteed salvage value.
• C) The lessee has the option to purchase the leased asset in 4 years for $2 when the asset's salvage value is expected to be $20,000.
• D) The asset's useful life is 20 years; a 4-year lease occurs when the asset is 26 years old.

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Definitions:

Action Identification Theory

A psychological framework positing that how individuals conceive their actions, ranging from low-level specifics to high-level outcomes, influences their execution and perception of these actions.

Abstract Goal

An aim or objective that is not concrete or tangible but rather conceptual or theoretical in nature.

Concrete

Relating to tangible objects or specific things rather than ideas or abstract qualities.

Construal Level Theory

A psychological theory suggesting that the distance (temporal, spatial, social, or hypothetical) from an event affects our thinking about it, with more distant events considered in more abstract terms.