1. Which of the following statements is true about accounting for leases?
   1. In financial accounting, the future payments on a finance lease are viewed as a commitment rather than a liability
   2. Reporting under a finance lease is equivalent to buying the leased asset.
   3. Under an operating lease, no liability is recorded.
   4. Under a finance lease, only the initial payment is recorded as a liability.
   5. Under an operating lease, no right-of-use asset is recorded.

2. Under an operating lease:
   1. the lessee does not obtain substantially all the benefits and risks of ownership.
   2. the lease transaction is reported more like a purchase.
   3. No liability is reported on the balance sheet
   4. All criteria need to be met to qualify for this classification
   5. Only one criteria needs to be met to qualify for this classification

3. On December 31, 20X5, Edward Inc. leases equipment from Big House Company for six years requiring an annual payment of $30,000 on December 31 of each year. The first payment was made immediately. Edwards incremental borrowing rate is 6 percent and uses straight-line method of depreciation. Which of the following statement is true?

1. If the lease is recorded as an operating lease, Edward will report an initial lease liability of $1,800,000.
2. Amortization expense will be same irrespective of the lease being recorded as operating or capital.
3. If the lease is recorded as a finance lease, Edward will initially report the leased asset at an amount equal to the present value of all the lease payments.
4. Edward will not report any amount related to the lease as it is considered off-balance sheet.
5. The lease agreement will need to meet all five criteria to be reported as a finance leas