Executory costs
A)are included in the minimum lease payments by the lessee
B)should normally be borne by the party that is, in substance, the owner of the asset
C)are the costs incurred by the lessor that are directly associated with negotiating and completing the lease transaction
D)are always paid by the lessee

Question

Quizplus · Accepted Answer

Executory costs are costs associated with the ongoing maintenance and operation of the leased asset. These costs are typically borne by the party that is, in substance, the owner of the asset, which is usually the lessor. The lessee may be required to pay some or all of these costs as part of the lease agreement, but they are not included in the minimum lease payments. Option A is incorrect because executory costs are not included in the minimum lease payments. Option C is incorrect because it describes the costs incurred by the lessor in negotiating and completing the lease, which are not executory costs. Option D is incorrect because the lessee may not always be responsible for paying the executory costs.

Executory Costs