If a lease is capitalized, it has one of the following attributes:
A)it shows up as a liability on the lessor's financial statements.
B)it is debt on the right-hand side of the lessee's balance sheet, and an asset on the left.
C)the lease's present value shows as a liability on the lessee's balance sheet, but not an asset.
D)the lease becomes a capital asset for the lessor, allowing him to capitalize on its value to borrow more.

Question

Quizplus · Accepted Answer

Capitalizing a lease means that the lessee records the leased asset as if it were purchased, showing it as an asset on the balance sheet and the lease obligation as a liability. This reflects the economic reality of a long-term right to use an asset and the obligation to make payments.

If a Lease Is Capitalized, It Has One of the Following