A lease is a contractual agreement between two parties; the lessee and the lessor. The company need to decide what asset is needed. Then they will negotiate a lease contract with a lessor for use of the asset. The lessee has the right to use the asset and must make periodic payments to the lessor. The lessor is usually either the assets manufacturer or an independent leasing company. (NEED HANDWRITTEN)

Required:

1. Discuss the accounting criteria for determining whether or not a lease must be reported on the balance sheet. In each case, give a rationale for the criterion.

(5 marks)

(CLO3:PLO2:C4)

2. Proponents of leasing make many claims about why firms should lease assets rather than buy them. Some of the reasons given to support leasing are good, and some are not. Give FIVE (5) reasons why leasing can considered as a good choice to company.

(10 marks)

(CLO3:PLO2:C4)