Question

C corporation, a lessee, has a rate of return on assets of 10%. the rate of return on assets is immediately increased when c records: a finance lease an operating lease a. yes yes

b. no no
c. yes no
d. no yes

Answer 1

The correct answer is that the rate of return on assets for a C corporation increases with a finance lease and does not change with an operating lease.

Step-by-step explanation:

The student's question pertains to the impact on the rate of return on assets when a C corporation, acting as a lessee, records either a finance lease or an operating lease. The correct answer is option C, meaning the rate of return on assets increases when a finance lease is recorded, but it does not change when an operating lease is recorded. Recording a finance lease involves recognizing both an asset and a liability on the balance sheet, which typically results in a higher return on assets, at least in the short term. Conversely, an operating lease does not result in the recognition of assets and liabilities in the same manner, and hence, it does not have the same initial effect on the rate of return on assets.