USGAAP and IFRS Provide Criteria for Distinguishing Operating Leases from Capital

question 243

Multiple Choice

U.S.GAAP and IFRS provide criteria for distinguishing operating leases from capital leases.Which of the following is not true?

• A)Under the capital, or finance, lease method, the lessor records the signing of a capital lease the same as if the lessor sold the leased asset for an installment note receivable.
• B)Under the capital, or finance, lease method, the lessor recognizes interest expense on the lease liability, similar to recognizing interest expense on long-term notes or bonds.
• C)Under the capital, or finance, lease method, the lessee amortizes the leased asset, similar to recognizing depreciation on buildings and equipment.
• D)Under method, the lessee records the leased asset and the lease liability on the balance sheet at the present value of the contractual cash flows at the time of signing the lease.
• E)The capital, or finance, lease method, treats leases equivalent to installment purchases or sales, where the lessee borrows funds from the lessor to purchase the asset and the lessor recognizes profit at the time of sale.

---

Definitions:

American Adults

Individuals within the United States aged 18 years or older, typically considered the legal age of maturity.

Derived Demand

Demand for a good or service that arises from the demand for another good or service, typically seen in business-to-business market scenarios.

Retail Stores

Physical locations where consumers can purchase goods and services directly, offering a variety of products from different brands and manufacturers.

Gross National Product

The total value of all goods and services produced by a country’s residents and businesses, regardless of the production location.