A Lease That Gives the Lessee the Option to Purchase

question 56

Multiple Choice

A lease that gives the lessee the option to purchase the asset at its fair market value at the termination of the lease is called a:

• A)fair market value cap lease.
• B)fair market value lease.
• C)$1.00 out lease.
• D)fixed price lease.
• E)synthetic lease.

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Definitions:

Interest

The cost of borrowing money, typically expressed as an annual percentage of the principal amount.

Allowance Method

An accounting technique used to account for accounts receivable that a company does not expect to collect fully, thereby creating an allowance for doubtful accounts.

Perpetual Inventory System

An inventory accounting method that instantly records inventory sales or purchases using computerized point-of-sale systems and enterprise asset management software.

Accounts Receivable

This refers to the money owed to a company by its customers for goods or services that have been delivered or used but not yet paid for.