A Lessee's Option to Purchase a Leased Asset at a Price

question 26

Multiple Choice

A lessee's option to purchase a leased asset at a price that is substantially lower than the asset's fair value is referred to as a ________.

• A)bargain purchase option
• B)guaranteed purchase option
• C)early purchase option
• D)residual purchase option

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Definitions:

Acquisition of Inventory

The process of obtaining goods or materials for sale or use, either through purchase or production.

Purchases Account

A general ledger account in which the purchases of goods intended for resale are recorded.

Gross Profit

The difference between sales revenue and the cost of goods sold before deducting operating expenses, interest, and taxes.

Overall Profitability

An assessment of a company's ability to generate earnings as compared to its expenses and other relevant costs incurred during a specific period of time.