Which of the Following Statements Characterizes an Operating Lease

question 162

Multiple Choice

Which of the following statements characterizes an operating lease?

• A) The lessee reports cash outflows as financing activities.
• B) The lessor records depreciation and lease revenue.
• C) The lessor transfers title at the end of the lease term.
• D) The lessee has an option to purchase the leased assets and is reasonably sure to exercise the option.

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Definitions:

Balance Sheet

A financial summary indicating a company's assets, outstanding liabilities, and the total equity of its shareholders at a determined point in time.

Understated

Describes financial statements or figures that are reported as less than their actual values.

Purchase Price

The amount paid or to be paid by the buyer to acquire a good, service, or asset.

Net Income

The total earnings of a company after deducting all expenses, taxes, and costs from total revenue.