Which of the Following Would Indicate That the Lessee Should

question 23

Multiple Choice

Which of the following would indicate that the lessee should not classify a lease as a capital lease under SFAs No.13?

• A)The fair value of the leased asset is $100,000 and the present value of the minimum lease payments is $95,000.
• B)The lease provides for no unguaranteed salvage value.
• C)The lessee has the option to purchase the leased asset in 4 years for $2 when the asset's salvage value is expected to be $20,000.
• D)The asset's useful life is 20 years;a 4-year lease occurs when the asset is 26 years old.

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Definitions:

Net Realizable Value

The estimated selling price in the ordinary course of business minus the estimated costs of completion and the estimated costs necessary to make the sale.

Estimated Future Returns

Projections or forecasts about the potential gains or incomes from investments over a future period.

Sales Discounts

A reduction in the price of goods or services offered to customers, usually to prompt early payment or reward bulk purchases.

Gross Price Method

Gross Price Method involves recording inventory at its gross price, before deducting any trade discounts or rebates.