The Appropriate Valuation of an Operating Lease on the Balance

question 159

Multiple Choice

The appropriate valuation of an operating lease on the balance sheet of a lessee is:

• A)the absolute sum of the lease payments.
• B)zero unless the lessee made a prepayment of rent.
• C)the present value of the sum of the lease payments discounted at an appropriate rate.
• D)the market value of the asset at the date of the inception of the lease.

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Definitions:

Marginal Utility

The extra pleasure or benefit gained by a consumer from having an additional unit of a product or service.

Rutabagas

A root vegetable, often confused with turnips, known for its purple skin and yellow flesh; used in cooking for its mild, sweet flavor.

Broccoli

A green vegetable with a large flowering head, often eaten as food.

Diminishing Marginal Utility

The principle that as a consumer consumes more of a good, the additional satisfaction gained from each additional unit decreases.