Operating leases differ from capital leases in that
A)For a capital lease,the lessee records the lease payments as rent expense,but for an operating lease,the lessee reports the lease payments as depreciation expense.
B)For an operating lease,the lessee depreciates the asset acquired under lease,but for the capital lease,the lessee does not.
C)Operating leases create a long-term liability on the balance sheet,but capital leases do not.
D)Operating leases do not transfer ownership of the asset under the lease,but capital leases often do.
E)Operating lease payments are generally greater than capital lease payments.

Question

Quizplus · Accepted Answer

Operating leases do not transfer ownership of the asset under the lease, but capital leases often do. Capital leases are treated like purchases of assets, while operating leases are treated like rental agreements. Operating leases are generally short-term and have lower payments than capital leases. The distinction between the two types of leases is important for financial reporting and tax purposes.

Operating Leases Differ from Capital Leases in That