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 ChoiceA. 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.

In accounting, a finance lease is a type of lease where the lessee (the person leasing the asset)…

Answered: One of the five criteria for a finance…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter19: Lease Financing

Section: Chapter Questions

Problem 6MC: The lessee compares the present value of owning the equipment with the present value of leasing it....

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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.
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 please
Which 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.
The lessee compares the present value of owningthe equipment with the present value of leasingit. Now put yourself in the lessor’s shoes. In a fewsentences, how should you analyze the decision towrite or not to write the lease?
Which of the following should be included by the lessee in determining the amount of the right-to-use asset and lease liability: a. Fixed Payments: Yes/Unguaranteed Residual Value: Nob. Fixed Payments: Yes/Unguaranteed Residual Value: Yesc. Fixed Payments: No/Unguaranteed Residual Value: Yesd. Fixed Payments: No/Unguaranteed Residual Value: No
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