Generally accepted accounting principles require that certain lease agreements be accounted for as purchases. The theoretical basis for this treatment is that a lease of this type
A) Effectively controls the right of use of identified property
B) Is an example of form over substance
C) Provides the use of the leased asset to the lessee for a limited period of time
D) Must be recorded in accordance with the concept of cause and effect

Question

Quizplus · Accepted Answer

Certain lease agreements that effectively transfer the risks and rewards of ownership to the lessee must be accounted for as purchases. This is because the lessee gains effective control of the right of use of the identified property, and as such, the lease should be treated as a purchase of that property.

Generally Accepted Accounting Principles Require That Certain Lease Agreements Be