Costs Incurred by the Lessor That Are Associated Directly with Originating

question 37

Multiple Choice

Costs incurred by the lessor that are associated directly with originating a lease and are essential to acquire that lease are called initial direct costs.Initial direct costs are expensed at the inception of the lease in:

• A)An operating lease.
• B)A capital lease.
• C)A direct financing lease.
• D)A sales-type lease.

---

Definitions:

Net Operating Income

A measure of a company's profitability from its core business operations, excluding non-operating income and expenses.

Variable Expense Ratio

A measurement that indicates the proportion of variable expenses to sales, showing how costs change with sales volume.

Break-even Point

The sales amount where the total income matches the total expenses, leading to neither profit nor loss for the company.

High-low Method

An analytical technique used in accounting and finance to estimate fixed and variable costs associated with business operations based on the highest and lowest levels of activity.