An Owner of an Asset May Sell It and Then

question 24

True/False

An owner of an asset may sell it and then lease it back from the new owner.Where this lease meets the conditions to be classified as a finance lease,the profit or loss on the sale of the asset recorded by the lessee should be classified as a finance item in the income statement in the year of the sale.

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Definitions:

Variable Costing

A costing method that includes only variable production costs in the cost of goods sold and treats fixed overhead as a period expense.

Absorption Costing

A cost calculation method in accounting that adds all expenses related to manufacturing—direct materials, direct labor, and both fixed and variable overhead—into the final cost of a product.

Directly Traced

Refers to costs or expenses that can be directly linked to a specific product, service, or department.

Product Costs

Expenses directly incurred from the manufacturing of products, including direct materials, direct labor, and manufacturing overhead.