Asked by stephan vailes on May 16, 2024
Verified
Operating leases are leases that the lessee must capitalize on its balance sheet as an asset.
Operating Leases
Operating leases are contractual agreements in which the lessee pays to use an asset for a specific period without gaining ownership, typically used for equipment and vehicles.
Capitalize
The accounting practice of recording a cost/expense as an asset, rather than an expenditure, thereby extending the recognition of its financial impact over the useful life of the asset.
- Comprehend the principle and the method of accounting for both capital and operating leases.
Verified Answer
DT
Destiny ThompsonMay 20, 2024
Final Answer :
False
Explanation :
Operating leases do not require the lessee to capitalize the lease on its balance sheet as an asset. It is treated as a rental expense on the income statement.
Learning Objectives
- Comprehend the principle and the method of accounting for both capital and operating leases.