If a firm leases instead of borrowing, it
1) owns the asset
2) has the use of the asset
3) receives the depreciation expense
4) losses the asset's residual value
A)1 and 2
B)1 and 3
C)2 and 3
D)2 and 4

Question

If a firm leases instead of borrowing, it
1) owns the asset
2) has the use of the asset
3) receives the depreciation expense
4) losses the asset's residual value​
A)​1 and 2
B)​1 and 3
C)​2 and 3
D)​2 and 4

Quizplus · Accepted Answer

When a firm leases an asset, it does not own the asset but has the right to use it, meaning it does not receive the depreciation expense (which is applicable to the owner) and loses any residual value since it must return the asset at the end of the lease term.

If a Firm Leases Instead of Borrowing, It