Which of the Following Statements Regarding Leases Is FALSE

question 1

Multiple Choice

Which of the following statements regarding leases is FALSE?

• A)Absent market imperfections,leases represent another form of zero-NPV financing available to a firm,and the Modigliani-Miller propositions apply: Leases neither increase nor decrease firm value,but serve only to divide the firm's cash flows and risks in different ways.
• B)In a perfect market,the cost of leasing is equivalent to the cost of purchasing and reselling the asset.
• C)Each lease agreement can be tailored to fit the precise nature of the asset and the needs of the parties at hand.
• D)Features of leases will be priced as part of the lease payment.Terms that give valuable options to the lessee lower the amount of the lease payments,whereas terms that restrict these options will raise them.

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Definitions:

Beginning Inventory

The value of goods available for sale at the start of an accounting period.

First-In, First-Out

An inventory valuation method where the goods purchased or produced first are sold or used first.

Equivalent Units

A metric used in cost accounting to express the amount of work done by manufacturers who have partially completed units on hand at the end of an accounting period.

Work in Process-Assembly Department

Inventory account that tracks the cost of partially completed goods that are still in the production process in the assembly department.