Connect Access Card for Financial Accounting
Connect Access Card for Financial Accounting
9th Edition
ISBN: 9781259738678
Author: Robert Libby, Patricia Libby, Frank Hodge Ch
Publisher: McGraw-Hill Education
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Chapter S, Problem 1MCQ

Defining a Lessor

Which of the following best describes a lessor?

  1. a. The party that pays rent expense under an operating lease.
  2. b. The party that owns a leased asset.
  3. c. The party that services a leased asset under an operating lease.
  4. d. The party that pays for the right to use a leased asset.
Expert Solution & Answer
Check Mark
To determine

Find the correct option, the option which describes a lessor.

Explanation of Solution

Lease: This is a contractual agreement between two parties, lessor, the owner of the leased asset and the lessee, the person who leases the asset. In this contract, lessor transfers the right to use his assets to lessee for a stipulated period of time, and lessee pays lessor for granting him the right to use the assets.

Justification for correct answer: Lessor is the party in the lease contract who owns the asset and allows the other party to use his asset. So, option (b) is correct answer.

Justification for incorrect answers:

  • Option (a) is incorrect answer because lessee is the party which pays rent expense for using the asset of the lessor.
  • Option (c) is incorrect answer because lessee is the party which services a leased asset.
  • Option (d) is incorrect answer because lessee is the party who pays lessor for granting him the right to use the assets.
Conclusion

Hence, option (b) is the correct answer.

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