In a lease that is recorded as an operating lease by the lessee,the equal monthly rental payments should be
A) allocated between interest expense and depreciation expense.
B) allocated between a reduction of the liability for leased assets and interest expense.
C) recorded as a reduction in the liability for leased assets.
D) recorded as a rental expense.

Question

Quizplus · Accepted Answer

In an operating lease, the lessee only records the rental payments as a rental expense in their income statement. The asset being leased is not recorded on the lessee's balance sheet, and therefore there is no depreciation expense or reduction in the liability.

In a Lease That Is Recorded as an Operating Lease