A Lessee Is Attempting to Circumvent the Accounting Rules,which Require

question 223

Multiple Choice

A lessee is attempting to circumvent the accounting rules,which require lease capitalization.Which of the following is most likely to lead to classification of a lease as an operating lease for the lessee?

• A) contract provides that lessee pays executory costs
• B) contract provides for a third-party guarantee of residual value
• C) attempt to reduce the lessee's borrowing rate
• D) increase the term of the lease. decrease annual executory costs

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Definitions:

Value Judgments

Assessments or opinions based on personal values, ethics, or standards, rather than objective data.

Budget Line

A graphical representation showing all possible combinations of two goods that can be purchased with a given budget at fixed prices.

Money Income

The total amount of monetary earnings received by an individual or household over a specific time period.

Purposeful Behavior

Actions taken with a specific goal in mind, driven by intentions and often linked to rational decision-making.