During Year 5, Taylor Corporation signed a long-term lease for a building.It classified the lease as a capital lease and recorded it in the accounts as follows: Building ........... ..........................3,000
Capitalized Lease Obligation ..........................3,000
The transaction requires
A)inclusion in the statement of cash flows as an operating activity, only.
B)inclusion in the statement of cash flows as an investing activity, only.
C)inclusion in the statement of cash flows as a financing activity, only.
D)disclosure in a supplementary schedule or notes to the financial statements.
E)disclosure in managements' discussion and analysis.

Question

Quizplus · Accepted Answer

The transaction of signing a capital lease should be disclosed in a supplementary schedule or notes to the financial statements. It does not impact the statement of cash flows directly, as it is not a cash transaction. Therefore, option A, B, and C are incorrect. The disclosure in management's discussion and analysis may be required depending on the significance of the lease to the company, but it is not the best answer as it is not the primary location for such disclosures.

During Year 5, Taylor Corporation Signed a Long-Term Lease for a Building.It