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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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BuyFindarrow_forward

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Which of the following statements regarding the new accounting rules, which take effect in 2019, for leases is false?

  1. If the lease term is one year or longer, a liability must be recognized.
  2. If the lease term is less than one year, an asset must be recognized.
  3. The new lease accounting rules will result in more assets and liabilities being recognized on the balance sheet.
  4. Leasing will likely remain popular under the new lease accounting rules because leases do not require a large initial outlay of cash.

To determine

Concept introduction:

Bonds:

Bonds are debt instruments issued by the borrower company to its lenders. Bonds are issued at a specified rate of interest and for a specified time period. The bondholders get a fixed rate of interest on the bonds and repayment of the bonds at the maturity date. Bonds may be issued at a premium or discount. The premium or discount on issue of binds is amortized or the life of bonds using the straight line or effective rate methods.

To choose:

The False Statement about new rules of accounting for leases.

Explanation

Explanation for correct answer:

The new lease accounting rules will result in more assets and liabilities being recognized on the balance sheet. Hence, the correct option is c.

Explanation for incorrect answers:

a. The new lease accounting rules will result in more assets and liabilities being recognized on the balance sheet...

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