Which of the following is not a characteristic of a finance lease?
A) It is generally non-cancellable.
B) The lessee guarantees that the lessor will receive a specific residual value from the sale of the asset at the end of the lease term.
C) It is like a rental agreement.
D) The lessee has the right to use the leased asset.

Question

Quizplus · Accepted Answer

A finance lease is more akin to a purchase agreement rather than a rental agreement because it often transfers substantially all the risks and rewards incidental to ownership of the asset to the lessee. Rental agreements, which are more characteristic of operating leases, do not typically transfer such risks and rewards.

Which of the Following Is Not a Characteristic of a Finance