CFA Practice Question

There are 520 practice questions for this study session.

CFA Practice Question

What is the estimated difference between operating lease expense and pro-forma capital lease expense for a mature firm at the midpoint of a lease's life?

A. Operating lease expense is greater than pro-forma capital lease expense.
B. Operating lease expense is less than pro-forma capital lease expense.
C. The relationship between operating lease expense and pro-forma capital lease expense varies from firm to firm.
D. Operating lease expense is not significantly different from pro-forma capital lease expense.
Correct Answer: D

Typically, at the midpoint of a capital lease's life a firm will record about as much lease expense as it would if the lease had been structured as an operating lease. Therefore, the operating lease expense and pro-forma capital lease expense are about equal.

User Contributed Comments 4

User Comment
kuan Given the firm is mature.. Shouldnt the capital lease expense be less?
Piersy I thought A, b/c firm is mature therefore towards the end of the CL and lease expense will be less than equivalent OL lease expense. But it's the middle of the lease's life...
americade after depreciation / amortization falls off to nothing they are about the same
bundy Key is mid point its the point weher the expenses are pretty much equal
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