CFA Practice Question

There are 520 practice questions for this study session.

CFA Practice Question

Which of the following statements with regard to recording depreciation expense in an operating lease arrangement is true?

A. The lessee records depreciation expense over the estimated useful life of the asset.
B. The lessor records depreciation expense using the lease term in the calculation.
C. The lessor records depreciation expense using the estimated useful life of the asset in the calculation.
Correct Answer: C

In an operating lease the lessor owns the asset legally and accounts for it as such. Since the asset is returned to the lessor in an operating lease, depreciation is calculated based on the estimated useful life of the asset.

User Contributed Comments 4

User Comment
thud Difference between A and C?
nike lessee versus lessor.
mordja If the question involved a capital lease B would be correct.
Shaan23 Mordja --- NO.

With a capital lease the asset is derognized for the LESSOR. Removed from his BS.
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