A lease that should be accounted for by the lessee as ordinary rent expense is
A)a financing lease.
B)a capital lease.
C)an operating lease.
D)an accounting lease.
E)a sale-leaseback.

Question

Quizplus · Accepted Answer

An operating lease is a lease where the lessee does not acquire ownership of the leased asset and is not required to treat the lease liability as debt on its financial statements. Instead, the payments made under the operating lease are treated as rent expense and deducted in the period incurred. In contrast, a financing or capital lease requires the lessee to recognize the leased asset and lease liability on its balance sheet, and depreciation and interest expenses are recognized on its income statement. An accounting lease and a sale-leaseback are not recognized accounting concepts.

A Lease That Should Be Accounted for by the Lessee