At the Beginning of the Year, a Firm Leased Equipment

question 38

Multiple Choice

At the beginning of the year, a firm leased equipment on a capital lease, capitalizing $60,000 in both its lease liability and leased assets accounts. The contract calls for payments each December 31 of $15,000. The lessee's annual reporting period ends December 31 and the contract reflects 10% interest. The lessee made the first payment as required. Which of the following should be reflected on the statement of cash flows under the indirect method for the first year of the contract (ignoring noncash disclosures) ?

• A) $15,000 financing cash outflow
• B) $15,000 operating cash outflow
• C) $6,000 operating cash outflow; $9,000 financing cash outflow
• D) $9,000 addition in the reconciliation of earnings and net operating cash flow

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Definitions:

Systematic Processes

Methodical and organized procedures or methods followed to achieve specific goals.

Organized Approaches

Systematic methods or strategies applied to achieve goals in an orderly and efficient manner.

Mutually Accountable

A condition or situation where two or more individuals or parties share responsibility for their actions and outcomes.

Individually Accountable

The principle that each member of a group or team must take responsibility for contributing their own effort and work towards the collective goal.