L Corp. recorded a finance lease in February of Year 1 using an annuity due present value table. The company's statement of cash flows for the year ending December 31, Year 1 using the indirect method will report:
A) An addition to net income for amortization.
B) A cash inflow from financing activities.
C) A cash outflow from investing activities.
D) A cash inflow from operating activities.

Question

Quizplus · Accepted Answer

The company would report the right-of-use asset and the lease liability as a significant noncash investing and financing activity in the disclosure notes to the financial statements. The amount of interest paid would also be disclosed in the notes to the financial statements.

L Corp Recorded a Finance Lease in February of Year 1