On July 1, 2021, Salad Co. signed a 20-year building lease that it reported as a finance lease. Salad paid the monthly lease payments when due. How should Salad report the effect of the lease payments in the financing activities section of its 2021 statement of cash flows? a. An inflow equal to the present value of future lease payments on July 1, 2021, less 2021 principal and interest payments. b. An outflow equal to the 2021 principal payments only. c. The lease payments should not be reported in the financing activities section. d. An outflow equal to the 2021 principal and interest payments on the lease.
On July 1, 2021, Salad Co. signed a 20-year building lease that it reported as a finance lease. Salad paid the monthly lease payments when due. How should Salad report the effect of the lease payments in the financing activities section of its 2021 statement of cash flows? a. An inflow equal to the present value of future lease payments on July 1, 2021, less 2021 principal and interest payments. b. An outflow equal to the 2021 principal payments only. c. The lease payments should not be reported in the financing activities section. d. An outflow equal to the 2021 principal and interest payments on the lease.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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8. On July 1, 2021, Salad Co. signed a 20-year building lease that it reported as a finance lease. Salad paid the monthly lease payments when due. How should Salad report the effect of the lease payments in the financing activities section of its 2021 statement of
a. An inflow equal to the present value of future lease payments on July 1, 2021, less 2021 principal and interest payments.
b. An outflow equal to the 2021 principal payments only.
c. The lease payments should not be reported in the financing activities section.
d. An outflow equal to the 2021 principal and interest payments on the lease.
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