Operating leases are usually short-term and can be cancelled by the lessee if they choose to do so. The lease term is not related to the estimated property value. Operating leases are not required to be shown on the balance sheet and are generally classified as an operating expense. Therefore, the correct option is B, since it accurately describes the features of an operating lease.

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An Operating Lease

Question 39

Multiple Choice

An operating lease:

A) has a lease term equal to 75% or more of the estimated property.
B) is usually short-term and is often cancellable at the option of the lessee.
C) must show up on the balance sheet.
D) must be classified as current assets and flow through operating expenses.

Correct Answer: