From the lessee's perspective, in the earlier years of a lease,
A) Operating leases will cause debt to increase, compared to finance leases.
B) Operating leases will cause income to increase, compared to finance leases.
C) Finance leases will cause debt to increase, compared to operating leases.
D) Finance leases will enable the lessee to report higher income, compared to operating leases.

Question

Quizplus · Accepted Answer

Finance leases are capitalized on the balance sheet, increasing debt, whereas operating leases are not, leading to higher reported debt in the earlier years.

From the Lessee's Perspective, in the Earlier Years of a Lease