Under ASPE, Which Statement Is Correct for the Lessee

question 24

Multiple Choice

Under ASPE, which statement is correct for the lessee?

• A)If the present value of the minimum lease payments exceeds the fair value of the leased asset, the asset will be recorded on the balance sheet at the higher amount.
• B)If the present value of the minimum lease payments exceeds the fair value of the leased asset, the asset will be recorded on the balance sheet at the fair value amount.
• C)If the present value of the minimum lease payments is lower that the fair value of the leased asset, the asset will be recorded on the balance sheet at the unguaranteed residual value amount.
• D)If the present value of the minimum lease payments is lower that the fair value of the leased asset, the implicit rate must be used.

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Definitions:

Admitted

An insurance term referring to insurers who are licensed and authorized to do business in a particular state or country.

Partnership

A business organization where two or more individuals manage and operate the business in accordance with the terms and objectives set out in the Partnership Deed.

Contributing Assets

Assets given by owners or shareholders as part of their investment in the company.

Capital Balances

The amount of money invested in a company by its owners or shareholders.