Which of the Following Is Not a Possible Treatment of a Capital

question 24

Multiple Choice

Which of the following is not a possible treatment of a capital lease?

• A)The lessee treats lease payments as periodic expenses.
• B)The lessor treats the lease like a sale with vendor financing.
• C)The lease is treated by a third party like a loan with income realized through implicit interest in each lease payment.
• D)The lessee treats the lease as a purchase with debt financing.

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Definitions:

Normal Good

A type of good for which demand increases as the income of the consumer increases, showing a positive relationship between income and demand.

Demand Function

A mathematical formula that describes the relationship between the quantity of a good or service demanded and its price, along with other factors like income and the prices of related goods.

Substitution Effect

The effect observed when consumers replace more expensive items with cheaper alternatives due to changes in relative price levels, affecting demand for goods.

Utility Function

Describes how different combinations of goods or services (or different outcomes) provide levels of satisfaction or utility to an individual.