Firms Account for Leases Using Either the Operating Lease Method

question 195

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 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.
• B)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.
• C)The lessor amortizes the leased asset, similar to recognizing depreciation on buildings and equipment.
• D)The lessee recognizes interest expense on the lease liability, similar to recognizing interest expense on long-term notes or bonds.
• E)The lessor records the signing of a capital lease the same as if the lessor sold the leased asset for an installment note receivable.

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Definitions:

Directed Verdict

A ruling by the judge, after the plaintiff has presented her case but before any evidence is put forward by the defendant, in favor of the defendant because the plaintiff has failed to present the minimum amount of evidence necessary to establish his claim.

Jury Selection

The process of choosing jurors from the pool of potential jurors for a trial, through a series of questions and processes intended to ensure an impartial jury.

Breach of Contract

Not living up to a contract's condition, either written or verbal, in the absence of an acceptable legal reason.

Standard of Proof

is the level of certainty and the degree of evidence necessary for a judge or jury to believe a claim or find a defendant guilty in a legal proceeding.