Which of the Following Conditions Qualifies a Lease as a Finance

question 2

Multiple Choice

Which of the following conditions qualifies a lease as a finance lease?

• A) The leased asset is specific to the needs of the lessee and without significant changes would not be of use to another company.
• B) The present value of the minimum lease payments covers substantially all of the fair value of the property at the inception of the lease.
• C) The lease term covers the majority of the asset's economic life.
• D) The lease transfers the risks and benefits of ownership to the lessee.
• E) All of these answers are correct.

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Definitions:

Consumer Nondurable

Goods that are immediately consumed or have a lifespan of less than three years, such as food and clothing.

Medical Care

Professional services provided by individuals or institutions to individuals for the purpose of maintaining, improving, or managing health.

Gasoline and Oil

Refers to petroleum-based liquid mixtures primarily used as primary fuels in vehicles and industrial machines.

Durable Goods

Goods that are intended to last for a relatively long period of time without quickly wearing out, such as appliances, cars, and furniture.