Answered: what is One of the advantages of…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

what is One of the advantages of leasing rather than purchasing an asset is that leasing offers flexibility and a lower cost when disposing of the asset? Explain.

Expert Solution

Step 1: Meaning of lease

A lease can be defined as a contract where a party, being the owner (lessor) of an asset (leased asset), provides the asset for use by the lessee at a consideration (rental), either fixed or dependent on any variables, for a certain period (lease period), either fixed or flexible, with an understanding that at the end of...

Leases can involve all kinds of assets, from property, such as office buildings, to equipment, such as computers, cars, trucks, and factory machinery. A lease contract documents key terms for each lease and is signed by both parties: the lessor and the lessee.