In a Lease That Is Recorded as an Operating Lease

question 9

Multiple Choice

In a lease that is recorded as an operating lease by the lessee,the equal monthly rental payments should be

• A) allocated between interest expense and depreciation expense.
• B) allocated between a reduction of the liability for leased assets and interest expense.
• C) recorded as a reduction in the liability for leased assets.
• D) recorded as a rental expense.

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Definitions:

Uncollectible

Refers to accounts receivable that are considered to be uncollectable from debtors due to their inability to pay.

Credited

A term used in accounting to denote an increase in liabilities or equity accounts, or a decrease in assets or expense accounts.

Financial Assets

Assets that derive value from a contractual claim, such as cash, stocks, bonds, and bank deposits.