CONNECT FINANCIAL ACCOUNTING >I<
9th Edition
ISBN: 9781260728392
Author: Libby
Publisher: MCG
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Textbook Question
Chapter S, Problem 1MCQ
Defining a Lessor
Which of the following best describes a lessor?
- a. The party that pays rent expense under an operating lease.
- b. The party that owns a leased asset.
- c. The party that services a leased asset under an operating lease.
- d. The party that pays for the right to use a leased asset.
Expert Solution & Answer
To determine
Find the correct option, the option which describes a lessor.
Explanation of Solution
Lease: This is a contractual agreement between two parties, lessor, the owner of the leased asset and the lessee, the person who leases the asset. In this contract, lessor transfers the right to use his assets to lessee for a stipulated period of time, and lessee pays lessor for granting him the right to use the assets.
Justification for correct answer: Lessor is the party in the lease contract who owns the asset and allows the other party to use his asset. So, option (b) is correct answer.
Justification for incorrect answers:
- Option (a) is incorrect answer because lessee is the party which pays rent expense for using the asset of the lessor.
- Option (c) is incorrect answer because lessee is the party which services a leased asset.
- Option (d) is incorrect answer because lessee is the party who pays lessor for granting him the right to use the assets.
Conclusion
Hence, option (b) is the correct answer.
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Students have asked these similar questions
What do you think is the main criteria for the recognition of right of use asset and a lease liability on the part of the lessee?
Which of the following is a required financial statement presentation by a lessee for both capital leases and operating lease?
A. Amortization Expense and Interest Expense
B. Lease Expense
C. Right-of-Use Asset and Lease Liability
D. The reduction of the Lease Liability as a financing activity
Outline the accounting processes necessary for a lessee to use the operating lease technique.
Chapter S Solutions
CONNECT FINANCIAL ACCOUNTING >I<
Ch. S - Defining a Lessor Which of the following best...Ch. S - Prob. 2MCQCh. S - Prob. 3MCQCh. S - Prob. 4MCQCh. S - Prob. 5MCQCh. S - Prob. 6MCQCh. S - Prob. 1MECh. S - Prob. 2MECh. S - Prob. 3MECh. S - Prob. 4ME
Ch. S - Prob. 1ECh. S - Prob. 2ECh. S - Prob. 3ECh. S - Prob. 4ECh. S - Calculating a Deferred Tax Liability LOS-5 On...Ch. S - Prob. 6ECh. S - Prob. 7ECh. S - Prob. 8ECh. S - Prob. 9ECh. S - Prob. 10ECh. S - Converting Operating Leases to Capital Leases...Ch. S - Converting Operating Leases to Capital Leases...Ch. S - Computing Effective Tax Rates LOS-4 Below is...Ch. S - Prob. 4PCh. S - Prob. 5PCh. S - Prob. 6PCh. S - Analyzing Starbuckss Lease Disclosures The...Ch. S - Analyzing Disneys Income Tax Disclosures The...
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Which of the following should be included by the lessee in determining the amount of the right-to-use asset and lease liability:arrow_forwardWhat is the basic difference between the accounting procedures used by a lessor for a sales-type lease and those used for a direct-financing lease?arrow_forwardExplain the accounting involved in applying the operating lease method by a lessor.arrow_forward
- Outline the accounting processes that must be followed by a lessee when using the operational lease method.arrow_forwardIn accounting for a Type A lease, how are the lessee’s and lessor’s income statements affected?arrow_forwardWhat are the primary benefits to a lessor of entering into a lease arrangement?arrow_forward
- In accounting for a Type B lease, how are the lessee’s and lessor’s income statements affected?arrow_forwardBriefly discuss the conceptual foundation for asset and liability recognition in a lease transaction using the lessee's right-of-use methodology.arrow_forwardWhat do you think is the main difference of accounting for lease on the part of the lessee and lessor?arrow_forward
- If an entity as lessee presents as investment property a property interest held under an operating lease then the entity 1has the option of measuring some items of investment property using the cost model. 2shall measure in the financial statement all of its investment property using the fair value models 3shall measure that leased property interest under the fair value model and the remaining investment property using the cost model. 4shall measure that leased property interest under the cost model and the remaining investment property either using the cost model or the fair value model.arrow_forwardThe amount of gain (loss) on sale and leaseback transaction is: A. The difference of fair value and carrying of the underlying asset. B. The difference of the fair value of rights retained by the lessee and the carrying value of right-of use asset. C. The difference of the fair value of rights retained by the lessee and the carrying value of rights transferred to the lessor. D. The difference of the fair value of rights transferred to the lessor and carrying value of rights transferred to the lessor.arrow_forwardThe amount of gain (loss) on sale and leaseback transaction is: Group of answer choices The difference of the fair value of rights retained by the lessee and the carrying value of right-of-use asset. The difference of the fair value of rights transferred to the lessor and carrying value of rights transferred to the lessor. The difference of fair value and carrying of the underlying asset. The difference of the fair value of rights retained by the lessee and the carrying value of rights transferred to the lessor.arrow_forward
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