4 A lessee and lessor are trying to negotiate amutually beneficial lease payment but arefinding that the only lease payment they willboth agree to results in both parties having anNAL of zero.Which of the following statements must betrue? Select all that apply.A. the lessee and lessor face different tax ratesB. the lessee and lessor face the same tax rateC. the lessee and lessor face different interestratesD. there are no transaction costsE. the lessee and lessor face the same interestrate

Lessor and lessee agree to lease payment that is having net value zero.

Answered: lessee and lessor are trying to negotia…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Ch19-1: Is leasing a zero sum game in the sense that any gain to the lessee is a cost to the lessor? If not, how might both parties gain from a lease transaction? In your answer, explain how lessee and the lessor analyze the situation, why they might use different inputs in their analysis, and how those inputs differences could affect the outcome
Why might leasing be advantageous for both the lessor and the lessee? Group of answer choices If the lessor's tax rates are higher, the lessor can share some of its tax benefits with the lessee in the form of higher lease payments. The lessor can share some of the benefits related to lower transaction costs with the lessee in the form of lower lease payments. More than one of the other statements is correct. If the cost of capital is lower for the lessee, then the lessee can share some of the lower cost of capital with the lessor in the form of higher lease payments. None of the other statements is correct.
Which of the following is true? a. Points paid to get a mortgage (origination points) are tax deductible while points paid to lower the interest rate are not. b. Points paid to get a mortgage (origination points) are not tax deductible while points paid to lower the interest rate are. c. Both types of points are tax deductible. d. Neither type of points is tax deductible. If the listing realtor and your realtor (you are the buyer) are the same person a. you know you are going to get a great deal b. you do not really know whose interest the realtor has at heart c. this by law cannot happen d. you only have to pay half of the realtor's commission Which of the following statement is true? a. If you put less than 20% down on a house, you have to get mortgage insurance. No matter how much you put down, if you have a mortgage, you have to get mortgage insurance. b. c. If you put more than 10% down, you do not have to get mortgage insurance. d. Mortgage insurance from the lender is…
$1: Advance rentals representing option money as well as security deposits to insure faithful performance of certain obligations of the lessee (refundable deposits) are considered part of the lessee's taxable income. S2: Obligations of the lessor to third persons paid or assumed by the lessee in consideration of the lease contract is part of the former's taxable rental income. OS1 is true; S2 is false; OS1 is false; S2 is true OS1 is false; S2 is false OS1 is true; S2 is true
An increase in interest income recognized for the period on a lease agreement will have the effect of reducing the unearned revenue account for the lessor. Select one: True False
What is the correct treatment of advance payment made by the lessee to the lessor? A. None of the above B. If the advance payment representing loan is intended to be applied to unpaid rent, the amount is part of the debtor/lessor’s taxable income at the time of receipt of said amount. C. If the advance payment represents security deposit, the amount is part of the lessor’s taxable income. D. If the advance payment represents loan, the amount is part of the lessor’s taxable income.
If the lessee and lessor use different interest rates to account for a finance/sales-type lease, then what is going wrong?
Leasing can be beneficial due to: A Tax advantages for both lessors and lessees. B D Guaranteed asset ownership at the end of the lease term. Lower upfront costs compared to purchasing the asset. Reduced maintenance and repair responsibilities for the lessee.
Statement 1: The lessor will recognized the same gross profit whether the residual value is guaranteed by the lessee or not guaranteed by the lessee. Statement 2: Any initial direct cost paid by the lessor shall reduce the amount of unearned interest income that the lessor shall recognized at inception of the lease. Only statement 2 is correct O Both statements are correct O Both statements are incorrect. Only statement 1 is correct
One of the following statements is false: a. If the underlying asset will not revert to the lessor, the residual value is simply ignored by the lessor in the computation of unearned interest income and gross profit on the sale. b. The underlying asset will remain with the lessee if the lease provides for either a purchase option that is reasonably to be exercised or transfer of title to the lessee upon the lease expiration. c. When a lessor actually sells an asset that it has been leasing, the difference between the sales price and the carrying amount of the lease receivable is recognized in profit or loss. d. The gain or loss that pertains to the right retained by the seller-lessee in a sales and leaseback transaction is not recognized.
When is it appropriate for the lessee to use the lessor's implicit rate to calculate the present value of the lease payments? A.when the lessee's incremental borrowing rate is lower than the lessor's rate B.whenever the lessee knows what the lessor's rate is C.when the lessor's implicit rate is lower than the lessee's incremental borrowing rate D.when the lessor's rate is higher than the lessee's incremental borrowing rate
The key difference between rental income assessed under S10(1)(a) and S10(1)(f) is: a. The S10(1)(a) rental loss can be offset with other rental income b. The S10(1)(a) is not eligible for capital allowances c. The S10(1)(a) loss will be disregarded d. There is no difference between them

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lessee and lessor are trying to negotia utually beneficial lease payment but ar ding that the only lease payment they oth agree to results in both parties havi AL of zero.