How Does a Sales-Type Lease Differ from a Direct-Finance Lease

question 50

Multiple Choice

How does a sales-type lease differ from a direct-finance lease?

• A) The lessor depreciates the property over a longer period under a sales-type lease.
• B) The lessor uses a higher interest rate on a sales-type lease than on a direct-finance lease.
• C) The lessor receives less interest than on a direct-finance lease.
• D) The lessor receives a manufacturer's or dealer's profit.

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Definitions:

Principal

In legal and financial contexts, the original sum of money loaned or invested, before interest; in agency, the person or entity who authorizes an agent to act on their behalf.

Specific Authority

Power or permission given to an agent for specific tasks or transactions on behalf of the principal.

Necessarily Incidental

Activities or actions that are not central but are unavoidably part of or related to accomplishing a main activity or goal.

Borrow Money

The act of receiving funds from another party with the promise to return the principal amount along with potential interest.