The Five Criteria Provided in GAAP for Distinguishing a Finance

question 262

Multiple Choice

The five criteria provided in GAAP for distinguishing a finance lease from an operating lease do not include:

• A) The agreement specifies that ownership transfers at the end of the lease term.
• B) The collectibility of the lease payments must be reasonably predictable.
• C) The agreement grants the lessee an option to purchase the underlying asset that the lessee is reasonably certain to exercise.
• D) The noncancelable lease term is for the major part of the remaining economic life of the leased asset.

---

Definitions:

Danger

The possibility of suffering harm or injury.

Opportunities

Situations or conditions that present chances for progress or advancement.

Incompatible Goals

Objectives that conflict with each other and cannot be achieved simultaneously.

Interdependence

The mutual reliance between two or more groups or people.