Which of the following statements regarding leases is correct?
A) Capital leases are favored over operating leases.
B) A debit balance in the Leased Asset account on the balance sheet indicates an operating lease.
C) Title is transferred to the lessee at the end of an operating lease term.
D) Operating leases require the lessee to make rent payments.

Question

Quizplus · Accepted Answer

Operating leases require the lessee to make rent payments. Option A is incorrect as capital and operating leases are evaluated based on the specific circumstances of each lease. Option B is incorrect as a debit balance in the Leased Asset account may indicate either an operating or capital lease. Option C is also incorrect as title is not transferred to the lessee at the end of an operating lease term.

Which of the Following Statements Regarding Leases Is Correct