Which one of the following is not considered criteria to capitalize a lease? A.T

Question

Which one of the following is not considered criteria to capitalize a lease? A.The lease contains a bargain purchase otion. B.The lease transers ownership at the end of the lease term. C.The lease term is more than 75% of economic life of the property. D.The present value of minimum lease payments is less than 90% of the market value of the asset. E.All of the above. 16. The classification of current assets and current liabilities is important for A.Liquidity B.Working capital. C.A and B D None of the above 17.The amortization of a bond premium: A Decreases the carrying value of a bond and increases interest expense. B. Decreases the carrying value of a bond and decreases interest expense C. Increases the carrying value of a bond and increases interest expense D. Increases the carrying value of a bond and decreases interest expense 18.Discount on bonds payable is best described as: A.An element of future interest expense. B.A bonus paid by the bondholders to the issuing corpor

Explanation / Answer

(15) (D)

Present value of lease payments must be equal to or more than 90% of asset fair value.

(16) (C)

Working capital = Current asset - Current liabilities

Current ratio (Measure of liquidity) = Current asset / Current liabilities

(17) (B)

Both carrying value & interest expense will decrease.

(18) (A)

A bond's discount is allocated (spread) over future periods through interest expense.

(19) (A)

Amortization of bond discount keeps increasing the interest expense.

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