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Question:

Which of the following statements regarding the financial statement reporting of leases is most accurate ?

A Under an operating lease, the lessee treats the entire lease payment as a cash outflow from operations.
Explaination

With an operating lease, the entire lease payment is recorded as rent expense and classified as an operating cash outflow. A finance lease results in a lower current ratio than an operating lease because the current portion of the principal repayment component will be added to current liabilities. The lessor does not recognize any profit at the inception of a direct financing lease.