Which of the Following Is True of a Direct-Financing Lease

question 24

Multiple Choice

Which of the following is true of a direct-financing lease?

• A) The lessor does not recognize sales revenue from the leased asset.
• B) The lease agreement does not contain a provision for unguaranteed residual value.
• C) The cost of the leased equipment is valued at the recorded cost assigned to the inventory.
• D) The fair value of the leased asset is always greater than the carrying cost of the asset.

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Definitions:

Common Stock

An equity investment representing ownership in a company; holders typically have voting rights and may receive dividends.

Fair Value

A valuation of an asset or liability, determined by the current market prices in a lively market.

Consolidated Buildings

Buildings and related assets that are grouped together on a company's balance sheet after it has combined its financial statements with those of its subsidiaries.

Business Combination

A transaction or other event in which an acquirer gains control of one or more businesses, often involving a merger or acquisition.