In dicate each of the following statements as true or false. 1.→Lease Term refers to the fixed and cancelable term of the lease. 2.→Henry Company leases machines to Zoe Company. The contract states that the lease term is two years, with a rental payment of $10,000 per month. If Zoe continues to rent after the two-year term, the rental payment will be reduced to $1,000 per month for another two years. In this case, the real lease term is two years. 3.→Leasing equipment reduces the risk of obsolescence to the lessee and in many cases passes the risk of residual value to the lessor.
In dicate each of the following statements as true or false. 1.→Lease Term refers to the fixed and cancelable term of the lease. 2.→Henry Company leases machines to Zoe Company. The contract states that the lease term is two years, with a rental payment of $10,000 per month. If Zoe continues to rent after the two-year term, the rental payment will be reduced to $1,000 per month for another two years. In this case, the real lease term is two years. 3.→Leasing equipment reduces the risk of obsolescence to the lessee and in many cases passes the risk of residual value to the lessor.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![Question 1 lease
Indicate each of the following statements as true or false.
1.→Lease Term refers to the fixed and cancelable term of the lease.
2.→Henry Company leases machines to Zoe Company. The contract states that the lease
term is two years, with a rental payment of $10,000 per month. If Zoe continues to
rent after the two-year term, the rental payment will be reduced to $1,000 per month
for another two years. In this case, the real lease term is two years.
3.→Leasing equipment reduces the risk of obsolescence to the lessee and in many cases
passes the risk of residual value to the lessor<
4.-In the event that it is practicable to determine the implicit rate, the lessee uses its
incremental borrowing rate.
5.-If a lease does not transfer control of the asset over the lease term, the lessor will-
generally account for the lease as a sales-type lease.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F3ddfea07-54d5-485a-912c-dcc1db5d1630%2Fa254206d-d71d-4e94-b7a9-aa4cb2c095dd%2F5e8nqde_processed.png&w=3840&q=75)
Transcribed Image Text:Question 1 lease
Indicate each of the following statements as true or false.
1.→Lease Term refers to the fixed and cancelable term of the lease.
2.→Henry Company leases machines to Zoe Company. The contract states that the lease
term is two years, with a rental payment of $10,000 per month. If Zoe continues to
rent after the two-year term, the rental payment will be reduced to $1,000 per month
for another two years. In this case, the real lease term is two years.
3.→Leasing equipment reduces the risk of obsolescence to the lessee and in many cases
passes the risk of residual value to the lessor<
4.-In the event that it is practicable to determine the implicit rate, the lessee uses its
incremental borrowing rate.
5.-If a lease does not transfer control of the asset over the lease term, the lessor will-
generally account for the lease as a sales-type lease.
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