For a Leased Asset Under a Lease That Qualifies as a Capital

question 71

Multiple Choice

For a leased asset under a lease that qualifies as a capital lease, the depreciation period used by the lessee must be:

• A)The same period that was used by the lessor.
• B)The useful life to the lessee.
• C)The term of the lease regardless of the lease provisions.
• D)The remaining life of the asset at the time the lease agreement took effect.

Understand the impact of income taxes on project cash flows and profitability.

Calculate the total cash flow net of income taxes for a given project year.

Apply the concept of discounting to evaluate the present value of future cash flows.

Determine the effect of one-time expenses on project cash flows and tax liabilities.

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Definitions:

Materials Price Variance

The difference between the actual cost and the standard cost of materials used in production, multiplied by the quantity of materials used.

Standard Price

A pre-determined cost assigned to goods and services, used as a benchmark in budgeting and variance analysis.

Pounds

A unit of weight commonly used in the British imperial and United States customary measurement systems.

Direct Materials Price Variance

The difference between the actual cost of direct materials used in production and the expected (or standard) cost of those materials.