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

question 37

Multiple Choice

At the beginning of the year,a firm leased equipment on a capital lease,capitalizing $60,000 in its lease receivable account.The contract calls for December 31 payments of $15,000.The lessor'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 lessor should reflect which of the following in the first year of the lease contract (ignore noncash disclosures) ?

• A) $15,000 operating cash flow
• B) $6,000 operating cash flow;$9,000 investing cash flow
• C) $6,000 operating cash flow;$9,000 addition reconciling adjustment
• D) $9,000 investing cash flow

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Definitions:

Misstatement

An error or inaccuracy in a statement or document, which can be either unintentional or deliberate.

Fraud

An intentional deception made for personal gain or to damage another individual.

Misrepresentation Liability

Legal responsibility arising from providing false or misleading statements that someone else relies on to their detriment.

Negligently

Acting with a lack of care or attention to duty that results in harm or damage.