All of the Following Statements Are True Regarding the Circumvention

question 40

Multiple Choice

All of the following statements are true regarding the circumvention of accounting rules for leases when determining whether a lease qualifies as an operating or capital lease except

• A)the residual value guarantee is a device used by lessees and lessors by transferring some of the risk to a third party to convert financing leases to operating leases.
• B)the lessee who does not know exactly the lessor`s implicit interest rate might use a different (higher) incremental borrowing rate.
• C)lessors typically try to avoid having lease arrangement classified as operating leases.
• D)lessors typically try to avoid having lease arrangement classified as finance leases.

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Definitions:

Consumption

Spending by households on goods and services, with the exception of purchases of new housing.

Money Balances

The total amount of money held by individuals or entities in the form of cash or bank deposits.

Wealth Redistribution

The transfer of income and wealth from some individuals to others by means of a social mechanism such as taxation, public services, or welfare.

Inflation

The pace at which overall costs for products and services increase, diminishing the buying power.