Accounting: What the Numbers Mean 9th Edition by Wayne W McManus, Daniel F Viele, David H Marshall

Exercise 53

For the following questions, circle the best response.

The lessee’s entry to record a periodic cash lease payment on a capital lease results in

a. an increase in total liabilities and an increase in net income.

b. an increase in total liabilities and a decrease in net income.

c. an increase in total liabilities and a decrease in net income.

d. a decrease in total liabilities and an increase in net income.

Step 1 of 5

Capital lease is an agreement in which the lessor have to transfer the rights of ownership to the lessee at the end of the completion of the lease period. A Lessee is the person to whom a lease is granted, who rents land or property from a lessor (owner of the asset).