Firms Account for Leases Using Either the Operating Lease Method

question 86

Multiple Choice

Firms account for leases using either the operating lease method or the capital (finance) lease method.Which of the following is not true?

• A)The operating lease method treats leases as executory contracts.
• B)The operating lease method does not recognize a leased asset on the lessee's balance sheet.
• C)The operating lease method does not recognize a lease liability on the lessor's balance sheet.
• D)Under the operating lease method, the lessor recognizes rent revenue as the lessee uses the leased asset over time.
• E)Under the operating lease method, the lessee does not recognize rent expense as the lessee uses the leased asset over time.

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Definitions:

Probability Distribution

A probability distribution is a mathematical function that provides the probabilities of occurrence of different possible outcomes in an experiment.

Variability

The extent to which data points in a set differ from each other and from the mean of the set; a measure of dispersion or volatility.

Standard Deviation

A measure of the dispersion or variability of a set of data points around the mean, commonly used in finance to represent the volatility or risk associated with a particular investment.

Expected Return

A measure of the average likely profit or loss on an investment considering past performance or future forecasts.