Question

The Quebeclease Company offers La Presse a lease on a large printing press. The current value of the printing press is $50,000 and it is expected to have a market value of $30,000 in five years. The annual lease payments are $8,000 per year for five years. At the end of the lease, La Presse has the right to buy the printing press for $5,000. This is an example of:

I. asset-based financing
II. a lease that is likely to be considered a conditional sales agreement by the CRA
III. a sale and leaseback agreement

I only

II only

I and II only

II and III only

Answer 1

The Quebeclease Company offers La Presse a lease on a large printing press. The current value of the printing press is $50,000 and it is expected to have a market value of $30,000 in five years. The annual lease payments are $8,000 per year for five years. At the end of the lease, La Presse has the right to buy the printing press for $5,000. This is an example of a lease that is likely to be considered a conditional sales agreement by the CRA

Therefore correct answer is a lease that is likely to be considered a conditional sales agreement by the CRA

And correct option is: II only

A conditional sales agreement is an arrangement where buyer (La Presse) has the possession of the property but the property legally holds by owner/seller (The Quebeclease Company). The buyer will have the right to purchase the property after paying full amount as per agreement.