Jackson Corporation Leases Equipment to Andrews Company for a Five-Year

question 102

Multiple Choice

Jackson Corporation leases equipment to Andrews Company for a five-year period. At the beginning of the lease, Jackson records sales revenue. The lease to Andrews must ________.

• A) be a sales-type lease
• B) be a direct-finance lease
• C) have a bargain renewal option
• D) be an operating lease

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Definitions:

Equilibrium Quantity

The supply and demand of goods or services at the price where they are balanced.

Marginal Productivity

The additional output derived from the use of one more unit of a variable input while other inputs remain constant.

Equilibrium Wage Rate

The equilibrium wage rate is the wage level at which the quantity of labor supplied by workers equals the quantity of labor demanded by employers in the market.

Marginal Productivity

The change in output resulting from employing one more unit of a particular input, keeping all other inputs constant.