Answered: The situation which would normally lead…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The situation which would normally lead to a lease being classified as a
finance lease include all of the following, except

A. The lease transfers ownership of the underlying asset to the lessee at the end of the lease term.

B. The lessee has the option to purchase the asset at a price which is expected to be sufficiently higher than the fair value at the date the option becomes exercisable.

C. The lease term is for the major part of the economic life of the underlying asset even if title is not transferred.

D. The present value of the lease payments amounts to substantially all of the fair value of the underlying asset at the inception of the lease.

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