Which Statement Is Correct Respecting the Criteria for Determining Whether

question 21

Multiple Choice

Which statement is correct respecting the criteria for determining whether a lease is an operating or a finance lease?

• A) Substantially all of the risks and rewards of ownership have been transferred from the lessee to the lessor.
• B) There is a transfer of ownership to the lessee or a bargain purchase option (BPO) at the end of the lease.
• C) The lease term is a minor part of the economic life of the asset.
• D) The present value of the minimum lease payments comprises substantially 50% fair value of the leased asset.

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Definitions:

Cards

Pieces of heavy paper or thin cardboard, typically rectangular in shape, used for playing a variety of games.

At Least

Indicates the minimum quantity or the smallest amount possible or required.

Probability

An estimation of how likely it is for a specific event to occur, presented as a number from 0 to 1.

Face Card

A term used in playing cards to refer to Jacks, Queens, and Kings.