In Order for a Lessee to Capitalize a Lease,at Least

question 14

Essay

In order for a lessee to capitalize a lease,at least one of four criteria must be met.Answer the following questions about the third criterion,the one having to do with the useful life of the leased asset.
(a)State the criterion itself,specifically.
(b)Why does fulfilling this criterion imply a capitalized lease (i.e.why is this one of the criteria)?
(c)When is this criterion not applicable (i.e.when can it not be used to test whether a lease should be capitalized)?

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Definitions:

Stock Split

A corporate action in which a company divides its existing shares into multiple shares to boost the liquidity of the shares, though the overall value of the company remains the same.

Owner's Equity

The residual interest in the assets of an entity after deducting liabilities, representing the owners' share in the company's assets.

Dividend-to-Earnings Ratio

The dividend-to-earnings ratio indicates what portion of a company's earnings is paid out as dividends to shareholders, reflecting the company's dividend payout policy.