The operating lease method classifies all of the lease payment each period as _____.
A)an investment use of cash on the statement of cash flows.
B)an operating use of cash on the statement of cash flows.
C)a financing use of cash on the statement of cash flows.
D)a cash expenditure.
E)none of the above

Question

Quizplus · Accepted Answer

The operating lease method classifies all lease payments each period as an operating use of cash on the statement of cash flows. This method treats the lease as if it were a rental and does not recognize any asset or liability on the balance sheet. Therefore, the lease payments are considered an operating expense and are included in the operating section of the cash flow statement.

The Operating Lease Method Classifies All of the Lease Payment