All of the Following Statements Regarding Leases Are True Except

question 97

Multiple Choice

All of the following statements regarding leases are true except:

• A)For a finance lease the lessee records the leased item as its own asset.
• B)For a finance lease the lessee depreciates the asset acquired under the lease,but for an operating lease the lessee does not.
• C)Finance leases create a long-term liability on the balance sheet,but operating leases do not.
• D)Finance leases do not transfer ownership of the asset under the lease,but operating leases often do.
• E)For an operating lease,amortization expense and interest expense are combined as lease expense on the income statement.

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Definitions:

Personal-Use Asset

An asset primarily used for the personal enjoyment or needs of an individual or family, as opposed to business or investment use.

FMV

Fair Market Value (FMV) is the price that property would sell for on the open market, between a willing buyer and seller, with neither being under any pressure to buy or sell.

Date of Contribution

The specific day on which an asset or financial investment was contributed or transferred to a particular entity or project.

Separately Stated Item

Items on a partnership's or S corporation's income tax return that are listed separately to ensure proper treatment at the individual level.