Which One of These Conditions Must Be Met for a Lease

question 151

Multiple Choice

Which one of these conditions must be met for a lease to qualify as a capital lease?

• A) The lease contains a bargain purchase price at the end of the lease.
• B) The lease term is equal to 70% or more of the estimated life of the leased property.
• C) The present value of the minimum lease payments equals 80% or more of the fair value of the leased property at the inception of the lease.
• D) Management classifies the lease as operating.

---

Definitions:

Budget Constraint

The limitation on the consumption bundles that a consumer can afford given their income and the prices of goods and services.

Income

The sum of all a household’s wages, salaries, profits, interest payments, rents, and other forms of earnings in a given period of time. It is a flow measure.

Price

The cost at which something is sold or bought, determining the economic transaction between buyers and sellers.

Hot Dog

A cooked sausage, traditionally grilled or steamed and served in a partially sliced bun as a sandwich.