Which of the Following Lease Conditions Would Result in a Capital

question 157

Multiple Choice

Which of the following lease conditions would result in a capital lease to the lessee?

• A)The lessee will return the property to the lessor at the end of the lease term.
• B)The lessee can purchase the property for $1 at the end of the lease term.
• C)The fair market value of the property at the inception of the lease is $18,000;the present value of the minimum lease payments is $15,977.
• D)The lease term is 70% of the property's economic life.

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Definitions:

Required Return

The minimal yearly percentage increase essential to entice investment by individuals or companies into a certain project or security.

Per Share Dividend

The amount of dividend that is paid out for each share of a company's stock.

Dividend Increase

A rise in the amount of money paid to shareholders out of a company's earnings per share.

Annual Dividend

A payment made by a corporation to its shareholders, usually as a distribution of profits on a yearly basis.