A twenty-year lease obligation would appear on the balance sheet as

Question

Quizplus · Accepted Answer

When a company enters into a lease agreement, it is essentially committing to make payments over the term of the lease. If the lease term is for a period longer than one year, it is considered a long-term commitment. According to accounting standards, such as the International Financial Reporting Standards (IFRS) and the Generally Accepted Accounting Principles (GAAP), companies are required to recognize a right-of-use asset and a lease liability at the commencement of the lease term.
The right-of-use asset represents the company's right to use the leased asset over the lease term and is shown under non-current assets on the balance sheet. The lease liability represents the company's obligation to make lease payments and is shown under long-term liabilities if the lease term is more than one year. The portion of the lease liability that is due within one year is classified as a current liability.
Therefore, the correct answer is:
b. long-term liability.

A Twenty-Year Lease Obligation Would Appear on the Balance Sheet