Which of these is correct concerning the difference between an operating and a f

Question

Which of these is correct concerning the difference between an operating and a financial lease?

A)        Under a financial lease, the customer takes immediate possession of the asset, while under an operating lease; the customer must wait for possession until the full cost is paid.

B)        Under an operating lease, the lessor carries the risks and rewards, whereas with a financial lease, these are transferred to the lessee.

C)        A financial lease is a short-term lending arrangement, while an operating lease is a long-term arrangement.

D)        Both B and C.

Explanation / Answer

A option is false because customer takes possession of asset in financial lease after th term of the lease whereas in operating lease the title or ownerships attained during or after the lease term.

Option B is correct Under an operating lease, the lessor carries the risks and rewards, whereas with a financial lease, these are transferred to the lessee.

Option C is Incorrect because financial lease cover most of the economic life whereas operating lease covers only part of economic life

Best of Luck. God Bless

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