Firms Account for Leases Using Either the Operating Lease Method

question 143

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 recognizes 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:

Abbreviation

A shortened form of a word or phrase used to simplify written and verbal communication.

Pound

A unit of weight in the British imperial and the United States customary systems of measurement, equal to 16 ounces.

Lb

The abbreviation for pound, a unit of mass or weight in the British customary system of measurement.

Gram

A metric unit of mass equal to one-thousandth of a kilogram.