For a capital lease,an amount equal to the present value of the minimum lease payments should be recorded by the lessee as a(n):
A)Asset and a liability.
B)Asset and a different amount should be recorded as a liability.
C)Liability and a different amount should be recorded as an asset.
D)Expense.

Question

Quizplus · Accepted Answer

According to Generally Accepted Accounting Principles (GAAP), the lessee should record an asset and a liability equal to the present value of the minimum lease payments. This is because the lessee has obtained the use of an asset (the leased property) and is obligated to make payments (liability). Therefore, both the asset and liability should be recorded on the balance sheet.

For a Capital Lease,an Amount Equal to the Present Value