If the Present Value of Lease Payments Represents Substantially All

question 70

Multiple Choice

If the present value of lease payments represents substantially all of the fair value of the leased property, the

• A) conditions are met for the lease to be considered a finance lease.
• B) lease is uneconomical and should not be entered into.
• C) lease may be classified as an operating lease.
• D) recording of a lease liability is optional-that is, the off-balance-sheet approach can be elected.

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Definitions:

Bond Interest

The regular payments made to bondholders as compensation for the investment, typically expressed as a percentage of the principal.

Dividends

Disbursements issued to shareholders by a company, typically sourced from the firm's earnings.

Corporation

A legal entity that is separate and distinct from its owners, who are shareholders. The corporation itself can own assets, borrow money, sue or be sued.

Debt-To-Equity Ratio

It's a financial indicator that compares the proportions of debt and shareholders' equity in funding company assets.