The classifications of a lease by the lessee area. operating and finance leases. b. operating, sales, and finance leases. c. operating and leveraged leases. d. None of these answers are correct.

Question

Kramer

Business

28 January, 14:35

The classifications of a lease by the lessee area. operating and finance leases. b. operating, sales, and finance leases. c. operating and leveraged leases. d. None of these answers are correct.

+1

Answers (1)

Know the Answer?

Jayson · Answer 1

The correct answer is letter "A": operating and finance leases.

Explanation:

An operating lease allows the lessee to possess an object but not to own it. The lessee is to return the leased asset after a determined term agreed with the lessor. Operating leases are considered as renting for accounting purposes implying the transactions incurred as a result of the operating lease are not reflected on the company's Balance Sheet.

A financial lease carries the option of transferring ownership to the lessee after the term ends. How it is recorded on the Balance Sheet depends if the transfer is made or not.

Both types of leases represent the classifications of a lease by the lessee.