If a Corporation Signs a Ten-Year Lease for a Building

question 50

Multiple Choice

If a corporation signs a ten-year lease for a building and the present value of the lease payments is $250,000,the lease is a capital lease if the

• A)fair value of the building is $1,000,000.
• B)remaining useful life of the building is 20 years.
• C)lessor can purchase the building for $5,000 at the end of the lease when the fair value is estimated to be $25,000.
• D)building reverts back to the lessor at the end of the lease.

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Definitions:

Perpetual Inventory System

An inventory management system where records are updated on a continuous basis as inventory items are purchased and sold.

Transactions

Financial events that affect the assets, liabilities, and equity of a company.

Multiple-Step Income Statement

An income statement that separates operational revenues and expenses from non-operational ones to calculate net income.

Single-Step Income Statement

A simplified income statement that summarizes revenues and expenses in a single step, without categorizing them.