Question

Harrington Corporation recently leased a number of trucks from Andre Corporation. In inspecting the books of Harrington Corporation, you notice that the trucks have been recorded as assets on Harrington's balance sheet. The balance sheet also shows a liability for the leases. Based on this information, what type of acquisition are the trucks for Harrington?

Answer 1

The trucks can be considered as a capital lease, which is a long-term lease recorded on Harrington's balance sheet as an asset along with a corresponding liability for the lease payments.

Step-by-step explanation:

Harrington Corporation recently leased a number of trucks from Andre Corporation. The trucks have been recorded as assets on Harrington's balance sheet, while the liability for the leases is also shown. Based on this information, the trucks can be considered as an example of a capital lease.

A capital lease is a long-term lease that is recorded on the lessee's balance sheet as an asset, accompanied by a corresponding liability for the lease payments. It is a type of acquisition where the lessee gains the use of the asset while recognizing both the asset and the associated liability.