Answered: Compared to using a fi nance lease, a…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Compared to using a fi nance lease, a lessee that makes use of an operating lease will most
likely report higher:
A . debt.
B . rent expense.
C . cash fl ow from operating activity.

Expert Solution

Step 1

Lease: Lease is a contractual agreement whereby the right to use an asset for a particular period of time provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as “lessor” and the user, to whom the right is transferred to, is termed as “lessee”.

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