### Understanding Operating LeasesIn an operating lease, the following accounting practices are observed:**Multiple Choice Question:**_In an operating lease, the:_- **Option A:** Lessor records interest revenue. - **Option B:** Lessee records an asset and a liability for the present value of lease payments.- **Option C:** Lessor records a receivable for the present value of lease payments.- **Option D:** Lessee records an asset and a liability for the total of the lease payments.### Explanation:Operating leases are treated differently from finance leases in accounting. Generally, for an operating lease, the lessee does not record an asset or liability on the balance sheet for the lease itself, unless required by specific accounting standards (e.g., IFRS 16). Instead, lease payments are simply expensed over the lease term. The lessor retains ownership and records the leased asset on its balance sheet while recognizing lease income over the lease period.

Lease refers to an agreement between the lessor who lends his asset to the lessee for him to use the…

In an operating lease, the: Multiple Choice lessor records interest revenue. lessee records an asset and a liability for the present value of lease payments. lessor records a receivable for the present value of lease payments. lessee records an asset and a liability for the total of the lease payments.

In an operating lease, the: Multiple Choice lessor records interest revenue. lessee records an asset and a liability for the present value of lease payments. lessor records a receivable for the present value of lease payments. lessee records an asset and a liability for the total of the lease payments.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter20: Accounting For Leases

Section: Chapter Questions

Problem 13GI: What is the basic difference between the accounting procedures used by a lessor for a sales-type...

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Leasing

Leasing is a contractual arrangement in which someone (a lessee) pays the owner (or lessor) of a building, land, vehicle, or other asset for the use of that asset. The lease is the agreement between lessee and lessor.

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