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.

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Definitions:

Marital Status

The legally defined relationship status of an individual in regard to marriage, such as single, married, divorced, or widowed.

Accounting Records

Documents and ledgers that contain the financial transactions and information of an entity, used to prepare financial statements.

Capital Section

Part of a company’s balance sheet that details the funding provided by owners and investors, including paid-in capital and retained earnings.

Revenue Section

Part of the income statement that details the amounts earned from normal business operations, excluding expenses to calculate gross profit.