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:

Marginal Cost Curve

A graph showing the change in total production cost that comes from making or producing one additional unit.

Competitive Firm

A company operating in a market where it has little to no market power, and thus sets its prices based on the market conditions.

Variable Factors

In economics, these are inputs or resources whose quantity can be changed in the short term to adjust the level of output.

Warehouse Space

The area available in a warehouse for the storage of goods, products, or materials.