Question

Which of the following is not true for a finance lease?
A The lease agreement has a primary period which covers all or most of the
useful economic life of the asset.
B The lessee is normally responsible for servicing and maintenance of the
asset.
C The lease payments will appear in the profit and loss account as an
expense.
D The lessee records the leased asset as a fixed asset in its balance sheet.

Answer 1

Option A: This is correct as the promary agreement covers all the necessary details about the assets' utilization during the contract period

Option B: This is true as lessee is the users of the asset and is solely responsible for maintainence of the asset during the contract period.

Option C:This is true. Lease payments will appear as expenses in the profit and loss statement, but the classification might differ.

Option D:This is incorrect as it is the lessor who record the leased asset as fixed asset in its balance sheet. CORRECT OPTION