ABCCompany agrees to lease some equipment from a lessor. The present value of the lease payments is
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Question:
ABCCompany agrees to lease some equipment from a lessor. The present value of the lease payments is $ABC Company's new accounting intern is unsure whether this lease should be classified as a finance lease or as an operating lease. Being a diligent worker, the intern prepares a balance sheet for each classification, which includes the initiation of the lease prior to any payments. What is the difference between the total assets on the two statements? ABC Company's total assets are:
Answer choices:
higher if the lease is classified as a finance lease, but by an amount other than $
the same on both statements.
$ higher if the lease is classified as a finance lease.
$ lower if the lease is classified as a finance lease.
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