Lease Capitalization's Value Determination Requires One of the Following Methods

question 84

Multiple Choice

Lease capitalization's value determination requires one of the following methods.

• A)Finding the net present value of future lease payments
• B)Recording the asset's purchase price as the lessee's asset
• C)The lessor shows the asset's effect on his leverage
• D)Altering the lessee's restrictive covenants by the amount of the asset's value

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Definitions:

Net Property

This term typically refers to the net book value of a company's property, plant, and equipment (PP&E) after accounting for depreciation and amortization.

Accumulated Depreciation

The total amount of depreciation expense that has been recorded for an asset since it was acquired, reflecting its loss of value over time.

Historical Cost

is the original monetary value of an asset or investment at the time of its acquisition, without adjustments for inflation or market fluctuations.

Common-Size Balance Sheet

A financial statement that presents all items as percentages of a common base figure rather than absolute numerical figures, facilitating comparison.