Which of the Following Is Not a Condition That Would

question 213

Multiple Choice

Which of the following is not a condition that would require the recording of a lease contract as a capital lease for a company reporting under ASPE?

• A) The lease transfers ownership of the property to the lessee.
• B) The lease term equals the asset's useful life.
• C) The lease term is less than 75% of the economic life of the leased property.
• D) The present value of the lease payments equals or exceeds 90% of the fair market value of the leased property.

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Definitions:

NPV Rule

A principle stating that an investment should be made if its net present value is positive, as it's expected to add value to the firm.

IRR Rule

A decision-making tool used in finance to evaluate investments, stating that a project is acceptable if its internal rate of return exceeds a predetermined threshold.

Internal Rate

NO. However, closely related term Internal Rate of Return (IRR) is a metric used in financial analysis to estimate the profitability of potential investments.

Present Value

The value today of a sum promised at a specified time in the future given a rate of interest. The amount that would have to be deposited today at the specified interest rate to grow into the promised sum on the specified date.