Refer to the Following Lease Amortization Schedule

question 164

Multiple Choice

Refer to the following lease amortization schedule. The 10 payments are made annually starting with the beginning of the lease. Title does not transfer to the lessee and there is no purchase option or guaranteed residual value. The asset has an expected economic life of 12 years. The lease is noncancelable.

-For a right-of-use asset under a lease that qualifies as a finance lease because the lease contains a purchase option and the option is reasonably certain to be exercised, the amortization period used by the lessee must be:

• A) The same period that was used by the lessor.
• B) The economic life of the asset at the time the lease agreement took effect.
• C) The term of the lease.
• D) The term of the lease or the economic life of the asset, whichever is shorter.

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Definitions:

Mass Production

A manufacturing method that produces large quantities of standardized products, often using assembly lines or automated technology, to achieve economies of scale.

Operations Quality

The measure of excellence and efficiency within an organization's production processes and workflows, aimed at meeting or exceeding customer expectations.

Lean Production

A manufacturing methodology that focuses on minimising waste within manufacturing systems while simultaneously maximizing productivity.

Flexible Manufacturing

a production system designed to easily adapt to changes in the type and quantity of the product being manufactured.