Porter Corporation NOTE: The following multiple choice questions require present value information.
On January 1,2012,Porter Corporation signed a five-year noncancelable lease for certain machinery.The terms of the lease called for:
What accounting method should Porter use to account for the equipment lease?
A) Operating Lease method
B) Capital Lease method
C) Equipment Lease method
D) Lessee Accounting method

Question

Porter Corporation NOTE: The following multiple choice questions require present value information.
On January 1,2012,Porter Corporation signed a five-year noncancelable lease for certain machinery.The terms of the lease called for:
 What accounting method should Porter use to account for the equipment lease?
A) Operating Lease method 
B) Capital Lease method 
C) Equipment Lease method 
D) Lessee Accounting method

Quizplus · Accepted Answer

The terms of the lease indicate that it is a noncancelable lease for a specific period of time, which meets the criteria for a capital lease. Under a capital lease, the lessee must record the leased asset and corresponding liability on their balance sheet and amortize the asset over its useful life. This is in contrast to an operating lease where the leased asset and corresponding liability are not recorded on the balance sheet.

Porter Corporation NOTE: the Following Multiple Choice Questions Require Present