Which of the Following Conditions Qualifies a Lease as a Finance

question 67

Multiple Choice

Which of the following conditions qualifies a lease as a finance lease?

• A) The present value of the minimum lease payments covers substantially all of the fair value of the property at the inception of the lease.
• B) The lease term covers the majority of the asset's economic life.
• C) The lease transfers the risks and benefits of ownership to the lessee.
• D) The leased asset is specific to the needs of the lessee and without significant changes would not be of use to another company.
• E) All of these answers are correct.

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Definitions:

Accounts Payable

Liabilities of a business that represent money owed to creditors for goods and services purchased on credit.

Accounts Payable

the amount a company owes to suppliers or creditors for goods and services bought on credit.

Inventory Decrease

A reduction in the quantity or value of inventory held by a business over a specific period.

Cash Payments

Transactions involving the transfer of cash from one entity to another, usually as exchanges for goods, services, or to settle debts.