If a lease transaction is in essence a purchase of an asset with the issuance of debt, then the lessee records both the asset and the liability on the balance sheet.

Question

Quizplus · Accepted Answer

In a finance lease, the lessee recognizes both the leased asset and the corresponding lease liability on the balance sheet, reflecting the substance of the transaction as a purchase with debt.

If a Lease Transaction Is in Essence a Purchase of an Asset