Which of the Following Characteristics Would Cause a Lease to Be

question 234

Multiple Choice

Which of the following characteristics would cause a lease to be declared a capital lease for accounting purposes?

• A) The present value of the lease payments equals 60% of the fair market value at the start of the lease.
• B) The lease does not transfer ownership of the property to the lessee by the end of the lease term.
• C) The lessee can purchase the asset at a price below fair market value when the lease expires.
• D) The lease term is at least 50% of the estimated economic life of the asset.
• E) The lessor maintains the insurance and maintenance on the leased asset.

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Definitions:

Time-Driven Activity-Based Costing

A refinement of activity-based costing that uses time as the main cost driver to allocate costs to products or services.

Order Fulfillment Department

The division within a company responsible for processing and delivering orders to customers.

Capacity Analysis

entails assessing the maximum output level an organization can achieve with its current resources, considering constraints like space and machinery.

Time-Driven Activity-Based Costing

A refinement of activity-based costing that assigns costs based on the duration activities require, leveraging time as the primary driver.