A lease in which at the end of the lease period the asset becomes the property of the lessee,possibly with an additional payment is called a(n):
A)operating lease.
B)short-term lease.
C)reverse lease.
D)capital lease.

Question

Quizplus · Accepted Answer

A capital lease, also known as a finance lease, is a lease agreement in which at the end of the lease term, the lessee has the option to purchase the asset for a nominal price or fair market value. Therefore, the lessee is effectively financing the purchase of the asset through the lease. This type of lease is treated as a purchase by the lessee and is recorded on the balance sheet as a liability and an asset.

A Lease in Which at the End of the Lease