Which of the following statements is FALSE? In a leveraged lease, the lessor borrows from...
Which of the following statements is FALSE?
In a leveraged lease, the lessor borrows from a bank or other lender to obtain the initial capital for the purchase, using the lease payments to pay interest and principal on the loan.
In some circumstances, the lessor is not an independent company but rather a separate business partnership, called a special-purpose entity (SPE), which is created by the lessor for the sole purpose of obtaining the lease.
In a direct lease, the lessor is not the manufacturer, but is often an independent company that specializes in purchasing assets and leasing them to customers.
SPEs are commonly used in synthetic leases, which are designed to obtain specific accounting and tax treatment.
Homework Answers
Answer: The second statement is false.
It is created by the lessee a for the sole purpose of obtaining the
lease and not the lessor (as given in the statement).
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Which two of the following five statements are correct? Select two alternatives: Because we are getting the entire asset when we purchase it with the loan, the loan payments are higher than the lease payments. In a capital lease, the firm does not report the present value of the future lease payments as a liability on the balance sheet. SPEs are commonly used in synthetic leases, which are designed...
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