Which of the Following Statements About 'Net' Finance Leases Is

question 103

Multiple Choice

Which of the following statements about 'net' finance leases is incorrect?

• A) The lessor will be responsible for the periodic maintenance of the asset.
• B) At the end of the lease period, the company will be required to make a residual payment.
• C) Upon payment of the residual amount, ownership of the asset transfers to the company.
• D) The lessor's role is one of financing, while the lessee makes regular rental payments.

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Definitions:

Capital Expenditure Budget

The capital expenditure budget outlines planned investments in long-term assets, including equipment, property, and other significant infrastructure projects.

Minimum Cash Balance

The smallest amount of cash that a company decides to hold in its accounts to ensure liquidity and smooth operations.

Cash Loan

A loan given to a borrower in cash, which must be repaid over a specified period along with interest.

Budgeted Depreciation

An estimate of the depreciation expenses for assets during a specific period as planned in a budget.