Question 1. lease 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. 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.
Question 1. lease 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. 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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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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