Indicate each of the following statements as true or false. If you think a statement is false, please provide your reason.

1. Blue Company leases machines to Pink Company. The contract states that the lease term is three years, with a rental payment of $20,000 per month. If Pink continues to rent after the three-year term, the rental payment will be reduced to $1,000 per month for another three years. In this case, the real lease term is three years.

2. In the lessee knows both the implicit interest rate and the incremental borrowing rate, the lessee should use the incremental borrowing rate as the discount rate.

3. If a lease does not transfer control of the asset over the lease term, the lessor will generally account for the lease as a sales-type lease.

4. Leasing equipment reduces the risk of obsolescence to the lessee and in many cases passes the risk of residual value to the lessor

Answer rating: 100% (QA)

ANSWER FALSE If a lease does not transfer control of the asset over the lease term the lessor will g... View the full answer