Lease vs. Make vs. Buy Decisions

Question 1

Which of the following asset acquisition method does not result in the asset appearing on the balance sheet?

A Made in-house

B Capital lease

C Operating lease

D Purchase

Answer 1

C

Question 2

Which of the following in NOT a primary factor when considering whether to make, lease, or purchase an asset?

A Accounting considerations

B Transfer price considerations

C Cash flow consideration

D Business considerations

Answer 2

B

Question 3

Which of the following expenses are recognized each period when a company has an operating lease on an asset?

A Lease expense only

B Interest expense and depreciation expense

C Interest expense only

D Depreciation expense only

Answer 3

A

Question 4

Which of the following expenses are recognized each period when a company has a capital lease on an asset?

A Lease expense only

B Interest expense and depreciation expense

C Interest expense only

D Depreciation expense only

Answer 4

B

Question 5

Which of the following is NOT a primary reason for choosing to lease an asset?

A To maintain flexibility

B To have greater control

C To limit cash usage

D To keep assets off balance sheet

Answer 5

B