Kevin has taken an apartment on lease for five years with a monthly rental of $3,500.At the end of five years,Kevin will be the legal owner of the apartment after an additional payment of $80,000.This type of lease is an example of a(n)_____ lease.
A) leveraged
B) capital
C) direct
D) operating

Question

Quizplus · Accepted Answer

The lease mentioned in the question is an example of a capital lease where the lessee (Kevin) has an option to purchase the asset (apartment) at the end of the lease term (five years) by making an additional payment ($80,000) which is a significant amount. In a capital lease, the lessee essentially becomes the owner of the asset once the lease term ends.

Kevin Has Taken an Apartment on Lease for Five Years