Int. 3 Exam 1

GAAP requires that some lease agreements be accounted for as purchases of assets. The theoretical justification for this treatment is that a lease of this type:

Conveys most of the benefits of property ownership

Distinguishing between operating and finance leases is due in large part to the accounting concept of:

Substance over form

When the total expenses over the life of an operating lease are compared to the total expenses over the life of a finance lease, one will find that:

The expenses of the finance lease and operating lease are equal

One of the five criteria for a finance lease specifies that the lease term be equal to or greater than:

The major part of the remaining economic life of the leased property