When a finance lease is first recorded at the beginning of the lease, the lessee typically debits:
A) Right-of-use asset.
B) Rent expense.
C) Lease expense.
D) Lease receivable.

Question

Quizplus · Accepted Answer

According to the lease accounting rules, the lessee must recognize a right-of-use asset and a lease liability on the balance sheet when they enter into a finance lease. The right-of-use asset represents the lessee's right to use the leased asset, while the lease liability represents the lessee's obligation to make lease payments over the lease term. Therefore, the lessee would debit the right-of-use asset to record the leased asset on the balance sheet.

When a Finance Lease Is First Recorded at the Beginning