Refer to the Following Lease Amortization Schedule

question 230

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.

-When a lease qualifies as a finance lease, what amount is recorded as the cost of the right-of-use asset?

• A) The present value of the lease payments, exclusive of nonlease components.
• B) The present value of the lease payments plus nonlease components.
• C) The sum of the gross lease payments.
• D) The present value of the lease payments plus the present value of nonlease components.

Recognize transitional expressions that indicate sequence or time.

Analyze stages of various processes and their purposes.

Interpret the structure of process paragraphs.

Learn how to prepare and execute a plan.

---

Definitions:

Accounting Period

This is a specific duration of time for which financial statements are prepared to understand and evaluate a company's financial performance.

Earned

Refers to income or revenue that a company has generated from its operations or business activities.

Adjustments

Records documented in the financial accounts at the end of a fiscal period to distribute revenues and expenses to the timeframe in which they were truly incurred.

Asset

An economic resource owned or controlled by a company that is expected to provide future benefits.