If the lessee and lessor use different interest rates to account for a capital lease,then:
A)Total expenses for the lessee will be different from the lessor's total revenues.
B)Total expenses for the lessee will equal the lessor's total revenues.
C)GAAP has been violated by at least one party.
D)The lessee will report more net income for the year.

Question

Quizplus · Accepted Answer

If the lessee and lessor use different interest rates to account for a capital lease, it means they have different assumptions about the value of the lease payments and the asset being leased. As a result, the total expenses for the lessee will be different from the lessor's total revenues, leading to a mismatch in their financial statements. This violates the principle of consistency in GAAP and can create confusion for investors and analysts trying to evaluate the financial performance of both parties.

If the Lessee and Lessor Use Different Interest Rates to Account