Which One of the Following Conditions in an Apparent Leasing

question 93

Multiple Choice

Which one of the following conditions in an apparent leasing contract may make Canada RevenueAgency (CRA) rule the contract to actually be a conditional sales arrangement:

• A) The lessor may sell the asset to a third party at the end of the lease
• B) The lessee has the option to buy the asset at fair market value at end of the lease
• C) The lessor retains ownership of the asset at the end of the lease
• D) The lessee automatically receives ownership of the asset at any time in the leasing period, including at the end of the lease.

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Definitions:

Direct Labor-Hours

The total hours worked by employees directly involved in the production of goods or services.

Machine-Hours

A measure of the amount of time a machine is operated, used in allocating manufacturing costs based on machine usage.

Underapplied Overhead

A condition where the allocated manufacturing overhead costs are less than the actual overhead costs incurred.

Overapplied Overhead

A situation where the allocated manufacturing overhead cost exceeds the actual overhead incurred.