1. A lease is classified as a capital lease because it contains a bargain purchase option. Over what period of time should the lessee amortize the leased property?
a. The lease term or the economic life of the asset, whichever is shorter.
b. The term of the lease.
c. The economic life of the asset, not to exceed 40 years.
d. The economic life of the asset.
2. The summary of significant accounting policies should disclose the
a. Criteria for determining which investments are treated as cash equivalents.
b. Terms for convertible debt to be exchanged for common stock.
c. Concentration of credit risk of all financial instruments by geographical region.
d. Maturity dates of noncurrent debts.
3. Which of the following does not need to be reported in a summary of significant accounting policies?
I Depreciation expense.
II Basis of profit recognition on long-term construction contracts.
III Composition of sales by segment.
a. I, II and III
b. I and III only
c. II and III only
d. I and II only