Which of the following leases is essentially the purchase of an asset with debt financing?

Question

Quizplus · Accepted Answer

A capital lease is essentially the purchase of an asset with debt financing. It transfers ownership of the asset to the lessee at the end of the lease term and involves a transfer of most of the risks and rewards of ownership. On the other hand, an operating lease is not considered a purchase and does not transfer ownership of the asset, but rather functions more like a rental agreement.

Which of the Following Leases Is Essentially the Purchase of an Asset