When would lessor classify the lease as an operating lease?
A)Lessor retains risk of breakage to leased asset.
B)Lessor has reward of high resale value.
C)Lessor does not have risk of change in demand for the leased asset.
D)Lessor does not have guaranteed residual value.

Question

Quizplus · Accepted Answer

Under an operating lease, the lessor does not bear the risk of changes in demand for the asset. They are only providing the use of the asset for a limited period of time and are responsible for the maintenance and insurance of the asset. Therefore, choice C is the best option.

When Would Lessor Classify the Lease as an Operating Lease