Lease Law, Tax, and Accounting Flashcards
6 cards from real CLP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Lease Law, Tax, and Accounting flashcards as text
Which UCC article governs the leasing of goods in the United States?
Answer: Article 2A
Article 2A of the Uniform Commercial Code covers leases of personal property and outlines the rights and responsibilities of parties involved.
How is a capital lease typically reported on a lessee’s balance sheet under GAAP?
Answer: As both an asset and a liability
Capital leases are recorded as both an asset and a liability, reflecting the right to use the asset and the obligation to make payments.
Which of the following is a tax advantage of a true lease for the lessee?
Answer: Deductibility of lease payments
In a true lease, the lessee may be able to deduct lease payments as an operating expense, reducing taxable income.
What is the primary difference between a lease and a secured loan under UCC rules?
Answer: A lease provides usage rights without ownership.
A lease grants the right to use an asset, while a secured loan typically results in the transfer of ownership and requires a security interest.
Which entity typically claims depreciation on leased equipment in a true lease?
Answer: Lessor
In a true lease, the lessor retains ownership and is entitled to take depreciation deductions for tax purposes.
Which standard governs lease accounting for public companies in the U.S.?
Answer: ASC 842
ASC 842 is the accounting standard that requires companies to recognize lease assets and liabilities on the balance sheet.