The appropriate asset value reported in the balance sheet by the lessee for an operating lease is:
A)Present value of the minimum lease payments.
B)Sum of the minimum lease payments.
C)Fair value of the asset at the inception of the lease.
D)Zero,unless a prepayment or accrual is involved.

Question

Quizplus · Accepted Answer

The appropriate asset value reported in the balance sheet by the lessee for an operating lease is zero, unless a prepayment or accrual is involved. Under the operating lease, the lessee does not own the asset and therefore does not record it as an asset on their balance sheet. Instead, they recognize only the periodic lease payments as an expense in their income statement. The lessor is responsible for reporting the asset on their balance sheet.

The Appropriate Asset Value Reported in the Balance Sheet by the Lessee