On March 1 of the Current Year, Stafford Corporation Leased

question 88

Multiple Choice

On March 1 of the current year, Stafford Corporation leased equipment under a six-year noncancellable lease. The estimated economic of the equipment is nine years. The fair value of the equipment is $780,000. The lease does not contain a bargain purchase option or a transfer of title. Stafford must classify this lease as a capital lease if the present value of the minimum lease payments is at least ________.

• A) $390,000
• B) $585,000
• C) $702,000
• D) $780,000

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Definitions:

Endorser

A person who signs a negotiable instrument on the back to transfer ownership or to guarantee payment to someone else.

Secondarily Liable

Refers to the obligation to pay a debt or fulfill an obligation only if the primary party responsible fails to do so.

Drawer

The party that writes or creates a bill of exchange, such as a check, commanding a payment to be made to a specified person or entity.

Secondarily Liable

Responsibility or liability that kicks in when the primarily responsible party fails to fulfill their obligations.