ABC Inc. leases equipment for 10 years. The annual lease payment is $8,000. The interest rate for a 10-year collateralized loan for ABC is 8%. Which of the following is correct? I The expenses related to the lease in year 1 will be greater if the lease is accounted for as a finance lease than if the lease is accounted for as an operating lease. II The total expenses over the 10-year life of the lease if the lease is accounted for as a finance lease will equal the total expenses over the 10-year life of the lease if the lease is accounted for as an operating lease. III The company will record interest expense if the lease is accounted for as a finance lease but not if the lease is accounted for as an operating lease. Select one: a. I, II and III b. I and II c. I and III d. II and III e. I
ABC Inc. leases equipment for 10 years. The annual lease payment is $8,000. The interest rate for a 10-year collateralized loan for ABC is 8%. Which of the following is correct?
I The expenses related to the lease in year 1 will be greater if the lease is accounted for as a finance lease than if the lease is accounted for as an operating lease.
II The total expenses over the 10-year life of the lease if the lease is accounted for as a finance lease will equal the total expenses over the 10-year life of the lease if the lease is accounted for as an operating lease.
III The company will record interest expense if the lease is accounted for as a finance lease but not if the lease is accounted for as an operating lease.
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