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If There Is Reasonable Assurance at the Inception of the Lease

question 75

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If there is reasonable assurance at the inception of the lease that the lessee will obtain ownership of the assets at the end of the lease term,then the leased asset should be depreciated over the lease term.


Definitions:

Present Value Amount

The current value of a future sum of money or stream of cash flows given a specified rate of return, important in discounting and investment decisions.

Rate of Earnings

A measure of profitability that indicates how much profits a company generates from its operations.

Present Value Factor

A factor used to calculate the present value of a future amount of money or stream of payments, considering a specific interest rate.

Rate of Return

The gain or loss of an investment over a specified period, expressed as a percentage of the investment’s cost.

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