Accounting Multiple Choice Question – 15 February 2025

With respect to an operating lease, which of the following statements is true?

Select ONE answer:

1. It is only possible to cancel the agreement during the term at significant cost
2. With this type of agreement, a company sells assets to a finance house and the finance house receives regular payments while the company uses the asset
3. It is a short-term lease that can easily be cancelled
4. It is a contract for a specified term, normally equal to the expected asset life

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 3

1. Not correct
2. Not correct
3. Correct == > An operating lease is a short-term contract which may not last for the full life of the asset. The lessor owns the asset. The other options are all common features of finance leases.
4. Not correct

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