If a Lessor Borrows Money on a Nonrecourse Basis to Purchase

question 4

Multiple Choice

If a lessor borrows money on a nonrecourse basis to purchase an asset that will be leased to another party,then:

• A)the lessor is responsible for the payments on the borrowed funds whether or not the lessee pays the lease payments.
• B)the lessee must pay both the lease payment and the loan payment.
• C)the loan is considered paid in full if the lessee discontinues making the lease payments or terminates the lease early.
• D)the lessor is only obligated to make loan payments as long as the lessor is collecting the lease payments.
• E)the lessor must pursue the lessee if the lessee fails to make the agreed upon lease payments.

---

Definitions:

Specific Identification

An inventory costing method that tracks the exact cost of each individual item in inventory to determine cost of goods sold.

Estimated Gross Profit

An expected amount of profit calculated by subtracting the estimated cost of goods sold from the estimated total sales revenue.

Sales Totaled

This term refers to the aggregate amount of revenue generated from the sale of goods or services over a specific period.

Inventory Cost

The total cost incurred for obtaining, storing, and managing inventory that has not yet been sold.