Which of the Following Statements Is Not True of a Financial

question 7

Multiple Choice

Which of the following statements is not true of a financial lease?

• A)it can be cancelled after the equipment is no longer needed.
• B)it is a source of financing.
• C)it is binding obligation for the lessee.
• D)it extends over most of the economic life of the leased asset.

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Definitions:

Depreciation Expense

An accounting method that allocates the cost of a tangible asset over its useful life, representing the wear and tear, deterioration, or obsolescence of the asset.

Interest Expense

The cost incurred by an entity for borrowed funds over a period of time, typically reported on the income statement.

Times Interest Earned

A financial ratio that measures a company's ability to meet its debt obligations based on its current income.