Which of the following statements concerning leases is true?
A) Capital leases are favored by lessees.
B) The appearance of the account Leased Asset on the balance sheet 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 required by GAAP in order to provide users of financial statements with information about a company's upcoming cash obligations related to leases. Choices A, B, and D are all incorrect. Capital leases and operating leases have their own advantages and disadvantages, and the appearance of a Leased Asset on the balance sheet can indicate either type of lease. Finally, present value is crucial in accounting for leases, as it is used to calculate the present value of lease payments and determine whether a lease should be classified as an operating lease or capital lease.

Which of the Following Statements Concerning Leases Is True