One of the five criteria for a finance lease specifies that the present value of the lease payments be equal to or greater than: Multiple Choice A. substantially all of the cost of the asset. B. the major part of the fair value of the asset. C. substantially all of the fair value of the asset. D. the major part of the cost of the asset. I chose Option C and it was incorrect. Please help.
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- The following are some of the characteristics of an asset available for lease. (Click the icon to view the lease characteristics.) Required a. Determine the amount of lease payment that the lessor would require to lease the asset. b. Compute the lessor's net investment in the lease at initial recognition. c. Compute the value of the lessee's ROU asset at initial recognition. d. Compute the lessee's lease liability at initial recognition. Requirement a. Determine the amount of lease payment that the lessor would require to lease the asset. Begin by calculating the present value of the residual value and the value to be recovered by the lessor from the annual lease payments. (Use a financial calculator for all present value computations. Enter your final answers as positive amounts rounded to the nearest whole dollar.) Present value of guaranteed residual value Value to be recovered by annual lease payments Determine the amount of lease payment that the lessor would require to lease the…The following are some of the characteristics of an asset available for lease. E (Click the icon to view the lease characteristics.) Required a. Determine the amount of lease payment that the lessor would require to lease the asset. b. Compute the lessor's net investment in the lease at initial recognition. Lease characteristics c. Compute the value of the lessee's ROU asset at initial recognition. d. Compute the lessee's lease liability at initial recognition. Fair value of leased asset $ 115,000 Lease term 7 years Payment frequency Annual Requirement a. Determine the amount of lease payment that the lessor would require to lease the asset. Payment timing Beginning of year Begin by calculating the present value of the residual value and the value to be recovered by the lessor from the annual lease payments. (Use the nearest whole dollar.) s rounded to Guaranteed residual value $ 19,000 Amount expected to be paid out under the guaranteed residual Present value of guaranteed residual…Which of the following is a criterion for classifying a lease for a lessee as a finance lease? The lease term is for a major part of the asset’s economic life. The lease transfers ownership of the asset to the lessee at the end of the lease term. The present value of the lease payments equals or exceeds substantially the asset’s fair value. All of the above.
- A lease agreement will qualify as a finance lease if one of these conditionsoccur: A. The lessee returns the leased property to the lessor at the end of the lease term.B. The lease does not have a bargain purchase option.C. The lease term is for major of the economic life of the asset.D. The present value of the minimum lease payment amounts to substantially less than the fair value of the leased asset.Which of the following statements is most CORRECT? Oa. A key difference between a capital lease and an operating lease is that with a capital lease, the lease payments provide the lessor with a return of the funds invested in the asset plus a return on the invested funds, whereas with an operating lease the lessor depends on the residual value to realize a full return of and on the investment. Ob. Finance leases usually have a cancelation feature. Oc. Capital, or financial, leases generally provide for maintenance by the lessor. Od. Capitalizing a lease means that the firm issues equity capital in proportion to its current capital structure, in an amount sufficient to support the lease payment obligation. Oe. The fixed charges associated with a lease can be as high as, but never greater than, the fixed payments associated with a loan.In calculating the amortization of a leased asset, the lessee should subtract a Select one: a. guaranteed residual value and amortize over the term of the lease. b. unguaranteed residual value and amortize over the term of the lease. c. guaranteed residual value and amortize over the life of the asset. d. unguaranteed residual value and amortize over the life of the asset. e. None of the above.
- There are two parties in any lease contract—the lessee and the lessor. To a lessor, a lease analysis involves a capital budgeting analysis of the property or equipment to be leased. The lessor’s decision is either to purchase and lease-out the asset, or not make the investment at all. Like any capital budgeting decision, the lessor needs to evaluate the rate of return expected to be earned from making the lease. Further, since the cost and other terms of leases involving high-cost items are negotiated, this rate of return information is also important information for a prospective lessee. From the following statements, identify the steps involved in lease analysis from a lessor’s perspective. Check all that apply. Determine the lease payments minus income taxes and any maintenance expenses that the lessor must incur as per the lease agreement. Determine the invoice price of the leased equipment minus any lease payments made in advance. Determine the periodic…We classify a lease as a finance lease if: Multiple Choice the present value of lease payments is less than the asset's book value. the present value of lease payments is less than the asset's fair value. the lessee obtains control of the use of the asset. the usual risks and rewards are retained by the lessor.Regarding a basic capital (finance) lease for a lessee, which of the following statements is INCORRECT? The lessee uses the lease as a source of funding. The lessee accounts for the lease as if an asset is purchased and a long-term obligation is entered into. The lessor uses the lease as a source of funding. The lessee records the leased asset at the lower of the minimum lease payments and the fair value of the asset at the lease's inception.
- help me to solve it pleaseWhich of the following is not one of the criteria for determining whether a lease is a finance lease? A. The asset cost is greater than $100,000B. The lease grants the lessee an option to purchase the asset that the lessee is reasonably certain to exerciseC. The lease term is for the major part of the remaining economic life of the assetD. Alease that transdies ownership of the asset to the lessee by the end of the lease termWhich of the following is not a criterion for a lease to be recorded as a finance lease?(a) There is transfer of ownership.(b) The lease is cancelable.(c) The lease term is for the major part of the economic life of the asset.(d) There is a bargain-purchase option.