What are executory costs?
A) Maintenance costs that are applicable to only operating leases.
B) Maintenance costs that are incurred only when the asset is leased.
C) Maintenance costs that are incidental costs in a lease that would be incurred by the lessee independent of whether the lessee had purchased or leased the asset.
D) Maintenance costs that are applicable to only finance leases.

Question

Quizplus · Accepted Answer

Executory costs are the costs that the lessee incurs in addition to the rent payments, such as maintenance costs, insurance, taxes, etc. These costs are incidental in nature and would be incurred by the lessee regardless of whether they had purchased or leased the asset. Therefore, option C is the correct answer. Options A and D are incorrect because they limit the applicability of executory costs to either operating leases or finance leases respectively. Option B is incorrect because it implies that maintenance costs are only incurred when the asset is leased, which is not accurate.

What Are Executory Costs