Under FASB Standard No

question 98

Multiple Choice

Under FASB Standard No. 13, which of the following element should be present to qualify as a capital lease?

• A) The lease does not transfer ownership of the property to the lessee by the end of the lease.
• B) The lease contains an option to purchase the property at a "bargain" price.
• C) The lease term is less than 50 percent of the economic life of the property.
• D) At the beginning of the lease, the present value of the lease payment is equal to 50 percent or more of the fair market value of the leased property less any investment tax credit received by the lessor.

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Definitions:

Production Possibilities

Production possibilities involve the various combinations of different goods or services that can be produced in a given economy with available resources and technology, illustrated by the production possibilities frontier.

Production Possibilities Curve

A graphical representation that shows the various combinations of two products that an economy can produce using all its resources efficiently.

Economies of Scale

Cost advantages reaped by companies when production becomes efficient, due to the scale of operation increasing.

Opportunity Cost

The abandonment of potential improvements from other possibilities once one choice is made.