Assume That Speery Agrees to Lease a New Machine from LEERY

question 84

Multiple Choice

Assume that Speery agrees to lease a new machine from LEERY on January 1,2017,for $30,000 per year,paid in advance (i.e. ,at the beginning of the year) .The lease term is 10 years and the asset's useful life is 8 years.There is no bargain purchase option.The unguaranteed residual value is $10,000.Which statement is correct?

• A)The unguaranteed residual will be recorded on Speery's balance sheet.
• B)The lease is an operating lease.
• C)The lease is a finance lease.
• D)More information is needed to determine the accounting treatment.

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Definitions:

Work Force

The collective group of individuals employed in a company or industry, contributing to its productivity through their efforts and skills.

Productivity

The efficiency with which inputs are converted into outputs, often measured in terms of the rate of output per unit of input.

Central Limit Theorem

A statistical principle that states the distribution of sample means approximates a normal distribution as the sample size becomes larger, regardless of the population's distribution.

68-95-99.7 Rule

A statistical rule stating that in a normal distribution, approximately 68% of the data falls within one standard deviation of the mean, 95% within two, and 99.7% within three.