Lease Y Contains a Bargain Purchase Option and the Lease

question 185

Multiple Choice

Lease Y contains a bargain purchase option and the lease term is equal to 75 percent of th estimated economic life of the leased property.Lease Z contains a bargain purchase optio and the lease term is less than 75 percent of the estimated economic life of the leased property.How would the lessee classify these leases?

• A)Choice 1
• B)Choice 2
• C)Choice 3
• D)Choice 4

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Definitions:

Cash

Currency and other liquid instruments such as checks and bank deposits that are readily available for use in transactions and other immediate needs.

Normal Credit Balance

The expected balance type for certain accounts in the general ledger, such as liabilities, equity, and revenue accounts.

Revenue

The income a company generates from its business activities, typically from the sale of goods and services to customers.

Liabilities

Economic obligations or debts that a business owes to external parties, which must be settled over time through the transfer of economic benefits.