Lease MCQs

By: Prof. Dr. Fazal Rehman | Last updated: May 21, 2025

1. : Lease is a long-term lease that is not cancelable and its life often matches the useful life of the asset:
(A) A financial
(B) An operating
(C) None of these
(D) —

2. : Lease refers to a short-term lease that is often cancelable. For example, a lease for office space represents this type of lease where the lease life is less than the useful life of the asset:
(A) A financial
(B) An operating
(C) None of these
(D) A net

3. : Which one of the following is not a way in which a lease could be terminated?
(A) Abatement
(B) Surrender
(C) Expiry
(D) Merger

4. : Which of the following are indispensable characteristics of a lease?
(A) Certainty of term, exclusive possession, and rent
(B) Certainty of term, exclusive possession, and creation by deed
(C) Certainty of term and exclusive possession
(D) Exclusive possession only

5. : Which of the following statements is most precise as it relates to the copy of a capital lease?
(A) The capital lease is shown on the lessee’s balance sheet as an asset and amortized over the asset’s useful life
(B) The capital lease is listed as an asset on the lessor’s balance sheet and amortized over lease term
(C) A capital lease is listed as an asset on the lessee’s balance sheet and must be amortized over the lease period
(D) A capital lease is listed as an asset on the lessee’s balance sheet and must be amortized over the asset’s useful life

6. : With a capital lease, the amount recorded on the asset side of the balance sheet is:
(A) The current fair market value of the asset being leased
(B) The current fair market value of the asset being leased less the expected residual value
(C) The present value of the minimum lease payments over the lease period
(D) The present value of the maximum lease payments over the lease period

7. : A ______ represents any limit imposed on a borrower by an investor and would be part of the loan agreement:
(A) Negative pledge clause
(B) Covenant
(C) Loan agreement
(D) General routine provision

8. : A ______ specifies all of the terms of a loan and the responsibilities of the debtor:
(A) Negative pledge clause
(B) Covenant
(C) Loan agreement
(D) General routine provision