Which of the following statements concerning leases is true?
A) Finance leases are favored by lessees.
B) The appearance of the account, Leased Asset, on the statement of financial position, signifies an operating lease.
C) The portion of a lease liability expected to be paid in the next year is reported as a current liability.
D) Present value is irrelevant in accounting for leases.

Question

Quizplus · Accepted Answer

The portion of a lease liability expected to be paid in the next year is reported as a current liability. This is because it represents the amount that the lessee will have to pay within the next operating cycle or within one year, whichever is longer. Option A is incorrect as finance leases are favored by lessors, not lessees. Option B is incorrect because both finance and operating leases can have a Leased Asset account on the statement of financial position. Option D is incorrect because present value is very important in accounting for leases, especially in determining the amount of the lease liability and lease asset to be recorded on the statement of financial position.

Which of the Following Statements Concerning Leases Is True