An Essential Element of a Lease Is That the

question 126

Multiple Choice

An essential element of a lease is that the

• A) lessor conveys less than his or her total interest in the property.
• B) lessee provides a sinking fund equal to one year's lease payments.
• C) property that is the subject of the lease agreement must be held for sale by the lessor prior to the drafting of the lease agreement.
• D) term of the lease is substantially equal to the economic life of the leased property.

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Definitions:

Equity Method

An accounting method used to assess the profits earned by investments in other companies by recording income equivalent to the investor's share of the investee's profits.

Cumulative Translation Adjustment

An entry in the comprehensive income section of a company's balance sheet that represents the aggregate effect of exchange rate changes on the translation of foreign subsidiaries' financial statements.

Current Rate Method

A method of foreign currency translation where all financial statement items are translated at the current exchange rate.

Cost of Goods Sold

The direct costs attributable to the production of the goods sold by a company, including materials and labor.