Henning Fulfillment Ltd

Multiple Choice

Henning Fulfillment Ltd. is an outsourcing company that packages and delivers the prizes and premiums awarded from company contests, charitable lotteries and mail-in sweepstakes. As a solution to its temporary liquidity problem it undertook a sale-and-leaseback arrangement with a financial institution with respect to its main warehouse. What may Henning?

A) The cost of the lease is higher than if the assets were leased in the usual way.
B) The leasing costs cannot be written off as an expense.
C) If the warehouse is sold, Henning may not benefit from any capital appreciation of the asset but may be subject to a tax liability for capital gain.
D) Henning will not be allowed to vacate the premises after a specified term as the lease arrangement is subject to being continuously rolled forward by the lessor.
E) Once the lease cost is established Henning will have no opportunity for rent review if property values, property tax or interest rates drop significantly.