Which of the following statements regarding leases is CORRECT?
A)Finance leases lower the debt ratio.
B)A debit balance in the Leased Asset account on the balance sheet indicates an operating lease that is less than one year.
C)Title is transferred to the lessee at the end of an operating lease term.
D)If a lease does not meet one of the five criteria provided by U.S.GAAP guidelines,it is classified as an operating lease by default.

Question

Quizplus · Accepted Answer

If a lease does not meet one of the five criteria provided by U.S.GAAP guidelines, it is classified as an operating lease by default. Option A is incorrect because finance leases increase the debt ratio. Option B is incorrect because a debit balance in the Leased Asset account on the balance sheet may indicate an operating lease that is more than one year. Option C is incorrect because title is not generally transferred to the lessee at the end of an operating lease term.

Which of the Following Statements Regarding Leases Is CORRECT