NOTE: The following multiple choice questions require present value information. On January 1, 2006, Price Corporation signed a five-year noncancelable lease for certain machinery. The terms of the lease called for:
What accounting method should Price use to account for the equipment lease?
A) Operating Lease method
B) Capital Lease method
C) Equipment Lease method
D) Lessee Accounting method

Question

NOTE: The following multiple choice questions require present value information. On January 1, 2006, Price Corporation signed a five-year noncancelable lease for certain machinery. The terms of the lease called for:
 What accounting method should Price 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 suggest that it is a capital lease. Therefore, Price should use the Capital Lease method to account for the equipment lease.

NOTE: the Following Multiple Choice Questions Require Present Value Information