When Is a Lease Recognized as an Operating Lease Under

question 39

Multiple Choice

When is a lease recognized as an operating lease under ASPE?

• A)if it is of low-value to the corporation
• B)if it is less than one year
• C)if it doesn't meet the criteria of an capital lease
• D)if the company elects to record as an operating lease

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Definitions:

Cycle Inventory

Inventory that companies maintain to facilitate production in batches or cycles, as opposed to continuous production.

Quantity Discounts

Price reductions offered to customers purchasing in large volumes, incentivizing bulk purchases and often used to reduce inventory holding costs.

Cycle Inventory

Refers to the portion of inventory available or planned to be available in a warehouse or distribution center for fulfilling demand during a specific period, without needing to restock.

Supply Chain

The interconnected network of entities involved in the production, handling, and distribution of goods or services from manufacturers to consumers.