Miller Company Leases Office Equipment from Swanson Company

question 200

Multiple Choice

Miller Company leases office equipment from Swanson Company.The fair value of the equipment exceeds Swanson's cost.Collectability of the lease payments is reasonably assured; there are no material uncertainties surrounding the lease.Additionally,there is a bargain purchase option.Swanson will account for the lease as a(n) ________.

• A)guaranteed lease
• B)direct financing lease
• C)operating lease
• D)sales-type lease

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Definitions:

Statement of Cash Flows

A document that outlines the effect of changes in income and balance sheet accounts on cash and cash equivalents, divided into sections for operating, investing, and financing activities.

Cash Transactions

Financial activities that involve the exchange of cash between two parties.

Balance Sheet

A financial statement that summarizes a company's assets, liabilities, and shareholders' equity at a specific point in time, giving a snapshot of its financial condition.

Balance Sheet

An overview document showing a business’s assets, liabilities, and the equity of its shareholders on a specific date.