Question

A lease where the lessee has to turn over the property to the lessor at the end of the lease is a/an:

Answer 1

Solution :

A lease where the lessee has to turn over the property to the lessor at the end of the lease is an Operating Lease.

Salient Features of an Operating lease :

The risks and rewards incidental to ownership are not transferred to the lessee in an operating lease.

The lessee does not have the option to purcahse the property at the end of the lease term. He has to turn over the property to the lessor at the end of the lease term.

The lease term in an operating lease does not cover a major part of the economic life of the asset / property.

Usually, Lease payments under an operating lease are recognised as an expense on a straight-line basis over the lease term unless another systematic basis is available, which is a representative of the time pattern of the lessee's benefit.

Thus the solution is Operating Lease.