If the Lessor Records Unearned Rent at the Beginning of a Lease

question 107

Multiple Choice

If the lessor records unearned rent at the beginning of a lease term, the lease must:

• A)Be a direct financing lease.
• B)Be a sales-type lease.
• C)Contain a bargain renewal option.
• D)Be an operating lease.

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Definitions:

Initial Costs

The initial expenses incurred during the setup or early stages of a project, including but not limited to setup, installation, and purchase costs.

MIRR

Modified Internal Rate of Return, a measure used to assess the profitability of an investment, accounting for the cost of capital and reinvestment of cash flows.

Terminal Value

The estimated value of a business or project at the end of a forecast period, often used in discounted cash flow analyses.

Non-normal Cash Flows

Cash flow patterns that do not match standard inflow and outflow models, often irregular in amount and timing.