Operating Lease vs Capital Lease

What is a key characteristic of an operating lease in terms of asset ownership?

• The asset is capitalized on the balance sheet.

• The lessee has an option to purchase the asset.

• The asset is treated as an operating expense.

• The lessee assumes ownership risks.

Which of the following is true about a capital lease?

• It is treated as an operating expense.

• The asset is recorded as an asset on the balance sheet.

• The asset is not recorded on the balance sheet.

• The lessee does not assume ownership risks.

In a capital lease, what percentage of the asset's useful life must the lease term cover?

• More than 75%

• Less than 50%

• Less than 75%

• Exactly 50%

How does a capital lease differ from an operating lease in terms of risk assumption?

• The lessee assumes no risk in both leases.

• The lessee assumes risk only in an operating lease.

• The lessee assumes risk only in a capital lease.

• The lessee assumes risk in both leases.

What is the primary financial treatment difference between an operating lease and a capital lease?

• Capital lease is treated as an expense.

• Operating lease is treated as a liability.

• Operating lease is treated as an expense.

• Capital lease is not recorded on the balance sheet.