Draper Corp

question 28

Multiple Choice

Draper Corp. leased a new building and land from Baylor Leasing Inc. for 25 years. At the inception of the lease the building and land have fair market values of $200,000 and $25,000, respectively. The building has an expected economic life of 30 years. Which of the following statements is correct regarding Draper's treatment of the lease?

• A) Draper should treat the lease as a capital lease even though there is no bargain purchase option and no automatic transfer of ownership at the termination of the lease.
• B) Draper should treat the lease as a capital lease only if there is either a bargain purchase option or an automatic transfer of ownership at the termination of the lease.
• C) Draper should treat the lease as a capital lease provided that the land and building are recorded in separate asset accounts and accounted for separately.
• D) Draper should treat the lease as a capital lease only if Baylor treats the transaction as a leveraged lease.

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Definitions:

Emotional Self-Control

The ability to manage and regulate one's emotions, especially in challenging situations, in order to maintain professionalism and achieve desired outcomes.

Financial Investments

Putting money into financial schemes, shares, property, or a commercial venture with the expectation of achieving a profit.

Personal Investments

financial assets purchased with the expectation that they will generate income, appreciate in value, or both, including stocks, bonds, real estate, and mutual funds.

Sales Territory

A defined geographical area assigned to a salesperson or team, within which they are responsible for selling a company's products or services.