Rent-a-Wreck leases cars and offers low prices to its customers because it requires the customers to pay a full year's rent at the time of signing the lease.Rent a Wreck records the revenue at the time the customer signs the lease.Rent-a-Wreck's accounting choice would be considered ________.

Question

Quizplus · Accepted Answer

Rent-a-Wreck's accounting choice of recording the revenue at the time the customer signs the lease is considered aggressive because it recognizes all of the revenue upfront instead of spreading it out over the full year of the lease. This approach can overstate the company's financial performance in the short-term, but it may not accurately reflect the actual revenue earned over the life of the lease.

Rent-A-Wreck Leases Cars and Offers Low Prices to Its Customers