Answer:
B. Increases the expected present value of lease cash flows to the owner
Explanation:
A lease option gives a right but not the obligation to the renter of the property to buy the said property at today's current market price upon the expiry of lease term.
Lease option is similar to an option contract, the difference being, here instead of securities, leased property serves as the underlying asset and instead of option premium, the renter pays a premium each year in addition to the rental charges.
Lease cash flows refer to the present value of future cash flows which the lessor/owner receives in the form of lease rentals plus the added premium each year.
The more the benefits under lease option clause, the higher the premium charged and thus, more would be the future receipts of owner which would increase the expected present value of lease cash flows to the owner.
Answer:
The correct answer is (A)
Explanation:
Soft drink manufacturing industry faces a high threat of substitutes. Not many soft drink brand exit the market but many new companies and brand enter. Similarly, that is the reason why prices of soft drink do not fluctuate as compare to other food items. The competitive environment in the soft drink industry creates a high threat of substitutes.
Answer:
The correct answer is that the valuation would decrease total assets and stockholders’ equity by $101.00
Explanation:
Item Cost Market price Impact
Quantity
1 220 $ 4.40 $ 4.60 no impact as cost is lower
2 130 $ 6.20 $ 6.00 ($6.20-$6.00)*
130=$26
3 100 $ 10.00 $ 9.25 ($10-$9.25)*100 =$75
4 25 $ 20.50 $ 25.00 No impact as cost is lower
The total reduction in the value of inventory as a result of adopting the lower of cost or market price valuation is $101 ($75+$26),hence decreases total assets by $101 and the stockholders' equity(retained earnings which is a component of stockholders' equity ) by the same amount
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