USGAAP Specifies Criteria for a Capital Lease

question 12

Multiple Choice

U.S.GAAP specifies criteria for a capital lease.Which of the following is not one of the criteria?

• A)The lease transfers ownership of the leased asset to the lessee at the end of the lease term.
• B)Transfer of ownership at the end of the lease term seems likely because the lessee has a bargain purchase option.
• C)The lease extends for at least 75% of the asset's expected useful life.
• D)The present value of the contractual minimum lease payments equals or exceeds 75% of the fair value of the asset at the time the lessee signs the lease using a discount rate appropriate for the creditworthiness of the lessee.
• E)The present value of the contractual minimum lease payments equals or exceeds 90% of the fair value of the asset at the time the lessee signs the lease using a discount rate appropriate for the creditworthiness of the lessee.

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Definitions:

Efficient Amount

The optimal level of production or consumption where resources are utilized in the most effective manner without waste.

External Cost

A cost of economic activity not borne by the producer or consumer, but rather by a third party or the environment, often leading to market failure.

Efficient Amount

The quantity of a product or service that achieves a perfect balance between economic efficiency and the satisfaction of all market participants.

Government Intervention

Actions taken by a government to adjust or interfere in the economic affairs of a nation, with the intention of achieving economic or societal objectives.