All of the following statements regarding leases are true except: For a capital

Question

All of the following statements regarding leases are true except: For a capital lease the lessee records the leased item as its own asset. For a capital lease the lessee depreciates the asset acquired under the lease, but for an operating lease the lessee does not. Capital leases create a long-term liability on the balance sheet, but operating leases do not. Capital leases do not transfer ownership of the asset under the lease, but operating leases often do. For an operating lease the lessee reports the lease payments as rental expense.

Explanation / Answer

All the statements hold true for lease except that that For a capital lease the lessee records the leased item as its own asset. A capital lease is a form of debt-equity financing in which the lease acts like loan. To that end, a capital lease must be recorded as liability on the company's balance sheet,

Under a capital lease, the lessee does not record rent as an expense. Instead, the rent is reclassified as interest and obligation payments,

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects