A firm entered into a finance lease at the start of the year. The lease payment is $2,000 per month is for the use of specialized manufacturing equipments. Which of the following statements regarding finance (i.e. capital) leases is most likely to be correct?

A The lease payment of $2,000 per month is an operating expense in the income statement.

B The value of the specialized manufacturing equipments is not reflected on the firms balance sheet

C The lease payment of $2,000 per month reduces both operating cash flow (CFO) and financing cash flow (CFF).

Which of the following statements about a sales-type lease is least likely to be correct?

A A sales-type lease is one of the two types of finance leases.

B A sales-type lease is recorded when the present value of lease payments is equal to the carrying value of the leased asset.

C A sales-type lease results in a revenue and cost of goods sold from the sale of the asset, and interest revenue from financing the sale.