All of the Following Criteria Would Qualify a Lease as a Capital

question 63

Multiple Choice

All of the following criteria would qualify a lease as a capital lease EXCEPT:

• A)the present value of the lease payments equals 70% of the market value of the leased asset.
• B)the lease term is 80% of the asset's estimated useful life.
• C)title to the leased asset transfers to the lessee at the end of the lease term.
• D)the lease agreement contains a bargain purchase option.

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Definitions:

Performance

The act of executing or accomplishing work, tasks, or duties, often measured against predefined standards.

Prepaid Rent

Represents the payment of rent in advance before it is due, recorded as an asset on the balance sheet until it is expensed.

Deferral

An accounting concept where revenue or expense is recognized at a date later than the point when cash was originally exchanged.

Accrual

An accrual occurs when revenue has been earned or an expense has been incurred but has not been recorded.