The amount recorded on the firm's balance sheet to account for a capital lease is
A) not needed, since financial leases are a source of off balance sheet financing.
B) the present value of the lease payments over the remaining life of the lease.
C) the sum of the lease payments over the remaining life of the lease.
D) determined using Canada Customs and Revenue Agency tables.

Question

Quizplus · Accepted Answer

The amount recorded on the balance sheet to account for a capital lease is the present value of the lease payments over the remaining life of the lease. This is because a capital lease is considered a long-term debt and must be recorded on the balance sheet as an asset and liability. The present value of the lease payments represents the current value of the lease obligation and is recorded as a liability, while the asset represents the leased property.

The Amount Recorded on the Firm's Balance Sheet to Account