Asked by Ailis Galdo on May 31, 2024
Verified
Which of the following best describes combination leases?
A) Combination leases combine the features of operating leases and financial leases.
B) Combination leases combine the features of operating leases and convertible debt.
C) Combination leases combine the features of operating leases and financial leverage.
D) Combination leases combine the features of operating and equity options.
Combination Leases
Combines some aspects of both operating and financial leases. For example, a financial lease that contains a cancellation clause—normally associated with operating leases—is a combination lease.
Operating Leases
Leasing agreements for assets where the lessor retains ownership, and the lessee uses the asset for a specified period.
Financial Leases
Long-term leases that are non-cancellable and include terms to buy the asset at the end of the lease period.
- Identify the features and consequences of various lease types (operating, financial, combination).
Verified Answer
(H
(K12_HN) Hoang Hai LongJun 02, 2024
Final Answer :
A
Explanation :
Combination leases combine the characteristics of operating leases and financial leases. They have aspects of both leases, and often involve a portion of the assets being leased and the remainder being financed with debt. This type of lease allows for more flexibility in terms of ownership and use of the asset.
Learning Objectives
- Identify the features and consequences of various lease types (operating, financial, combination).