Question

3. Effects of leasing on financial statements Aa Aa Leasing is often referred to as off-balance-sheet financing because of the way that the transaction is treated and reported in financial statements. Which of the following statements best describes the characteristics of off-balance-sheet financing? O Only the leased liabilities but not the leased assets under the lease contract appear directly on the firm's balance sheet. O Both the leased assets and the leased liabilities under the lease contract appear directly on the firm's balance sheet. Neither the leased assets nor the leased liabilities under the lease contract appear directly on the firm's balance sheet Only the leased asset but not the leased liabilities under the lease contract appears directly on the firm's balance sheet. Consider the following statement on capital leases: According to Statement 13, the payments on a financial lease should be treated as an operating expense and should not in any case affect a firm's true debt ratio.

Answer 1