Match these terms with their definitions.
-A non-cancelable agreement that is in substance a purchase of the leased asset.
A)Callable bonds
B)Long-term lease
C)Convertible bonds
D)Debenture bonds
E)Junk bonds
F)Mortgage bonds
G)Notes payable
H)Short-term lease
I)Secured bonds

Question

Quizplus · Accepted Answer

In the context of finance and accounting, a long-term lease, particularly a capital lease (also known as a finance lease), is treated like an asset purchase for accounting purposes. This type of lease typically spans several years and includes terms that effectively transfer the risks and rewards of ownership from the lessor to the lessee. Under certain conditions, such as a transfer of ownership at the end of the lease, a bargain purchase option, lease term for the major part of the economic life of the asset, or if the present value of lease payments amounts to substantially all of the fair market value of the leased asset, a lease is classified as a capital lease and recognized on the balance sheet as both an asset and a liability.

Match These Terms with Their Definitions