The operating lease method is appropriate when the
A)lessee enjoys most of the rewards and bears most of the risks of ownership.
B)lessor enjoys most of the rewards and bears most of the risks of ownership.
C)lessor enjoys most of the rewards, only.
D)lessor bears most of the risks of ownership, only.
E)lessee enjoys most of the rewards, only.

Question

Quizplus · Accepted Answer

The operating lease method is appropriate when the lessor enjoys most of the rewards and bears most of the risks of ownership. In an operating lease, the lessor retains ownership of the asset and is responsible for maintenance and repair, while the lessee only uses the asset for a specified period of time. The lessor receives the rental payments and assumes the risk of obsolescence and changes in the value of the asset. The lessee benefits from the use of the asset without having to bear the costs and risks associated with ownership.

The Operating Lease Method Is Appropriate When the