All of the Following Are Correct Regarding Operating Leases Except

question 69

Multiple Choice

All of the following are correct regarding operating leases except:

• A) Cash outflow is in the form of rent payments
• B) The rights to use the property for a specified period of time are conferred to the lessee by the lessor.
• C) At the end of the lease the lessee returns the property to the lessor
• D) Depreciation expense can be recorded on the books by the lessee

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Definitions:

Fixed Expenses

Expenses that remain constant regardless of any variations in the amount of goods produced or sold, including charges like lease payments, wages, and premiums.

Accounting System

A systematic process of recording, summarizing, and reporting the financial transactions of a business to provide insights into its financial position.

Selling Price

The price at which a product or service is offered to the consumer.

Contribution Margin

The contribution margin is the sales revenue minus the variable costs. It shows how much revenue contributes to covering the fixed costs and generating profit.