Regarding a basic capital (finance) lease for a lessee, which of the following statements is INCORRECT? O The lessee uses the lease as a source of funding. The lessee accounts for the lease as if an asset is purchased and a long-term obligation is entered into. O The lessor uses the lease as a source of funding. The lessee records the leased asset at the lower of the minimum lease payments and the fair value of the asset at the lease's inception.

Regarding a basic capital (finance) lease for a lessee, which of the following statements is INCORRECT? O The lessee uses the lease as a source of funding. The lessee accounts for the lease as if an asset is purchased and a long-term obligation is entered into. O The lessor uses the lease as a source of funding. The lessee records the leased asset at the lower of the minimum lease payments and the fair value of the asset at the lease's inception.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Which one of the following is an indicator that a lease is an operating lease for accounting purposes? Multiple Choice The lease transfers ownership of the asset to the lessee by the end of the lease term. The lessee will probably exercise the option to purchase the leased asset. The lease term represents a minor portion of the leased asset's economic life. The residual value plus the present value of the lease payments exceeds the value of the leased asset. The lessor has no use for the asset other than to lease it to the present lessee due to the specialized nature of that asset.
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Under ASC 842 If the present value of the lease payments is less than or equal to the fair value of the asset the lessor must classify the lease as a direct financing lease. True False
Outline the accounting procedures involved in applying the operating lease method by a lessee.
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