At the Beginning of the Year,a Firm Leased Equipment on a Capital

question 17

Multiple Choice

At the beginning of the year,a firm leased equipment on a capital lease,capitalizing $60,000 in both its lease liability and leased assets accounts.The contract calls for December 31 payments of $15,000.The lessee's annual reporting period ends December 31 and the contract reflects 10% interest.The lessee made the first payment as required.The direct method statement of cash flows for the lessee should reflect which of the following in the first year of the lease contract (ignore noncash disclosures) ?

• A) $15,000 financing cash outflow
• B) $15,000 operating cash outflow
• C) $6,000 operating cash outflow;$9,000 financing cash outflow
• D) $9,000 financing cash outflow

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Definitions:

Bills

Documents indicating a transaction or an obligation to pay for goods or services received.

QBO

Refers to QuickBooks Online, an accounting software based in the cloud, aimed at assisting small to medium businesses.

Expenses

The costs incurred by a business or individual in the process of earning revenue.

Deposit in Transit

A sum of money transferred or sent to a bank account but not yet recorded in the account's available balance, often due to processing times.