Monroe Company leases a tractor trailer, in what is classified as an operating lease. Minimum annual lease payment at the beginning of each year = $15,000; lease term = 4 years; appropriate discount rate = 6 percent; salvage value = $20,000. The asset and liability recognized on Monroe Company's (the lessee's) balance sheet at the beginning of the lease is $0.

Question

Quizplus · Accepted Answer

The present value of the lease payments is equal to the salvage value, so the asset and liability recognized on the lessee's balance sheet is $0.

Monroe Company Leases a Tractor Trailer, in What Is Classified