: Why might a business owner choose a gross lease over a net or percentage lease? a)You won't be responsible for any expenses. b)You'll be responsible for some expenses but the rent amount will be consistent. c)You won't have to pay as much in times where sales are slow. d)You'll own the space outright and have total control.

Answered: Why might a business owner choose a…

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

Why might a business owner choose a gross lease over a net or percentage lease?

	a)	You won't be responsible for any expenses.
	b)	You'll be responsible for some expenses but the rent amount will be consistent.
	c)	You won't have to pay as much in times where sales are slow.
	d)	You'll own the space outright and have total control.

Expert Solution

Step 1

The key advantage of a gross lease for the tenant is that they are aware of their fixed monthly expenses. Because of this, yearly cost forecasting is quite simple. A tenant who signs a gross lease won't have to worry about variable expenditures like utilities or unforeseen expenses like sharp increases in property value that result in higher taxes.