Firms Account for Leases Using Either the Operating Lease Method

question 142

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

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Definitions:

Financial Institutions

Businesses that provide financial services, including banks, credit unions, and insurance companies.

Compounded Semi-Annually

Interest on an investment or loan calculated twice a year, adding each interest payment to the principal.

Principal

The original amount borrowed or invested.

Payments 13 to 24

Refers to the series of payments that are made from the thirteenth to the twenty-fourth installment in a sequence of payments.