Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

5. Inventory

Financial Statement Effects of Inventory Costing Methods

Financial Accounting

5. Inventory

Financial Statement Effects of Inventory Costing Methods

Previous problemNext problem

Struggling with Financial Accounting?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

Which of the following best describes the balance sheet effect of a short-term (less than 1 year) lease under current accounting standards?

A right-of-use asset and a lease liability are recognized on the balance sheet.

Only a right-of-use asset is recognized on the balance sheet.

No asset or liability is recognized on the balance sheet.

Only a lease liability is recognized on the balance sheet.

Previous problemNext problem

Verified step by step guidance

Understand the concept of a short-term lease under current accounting standards. A short-term lease is defined as a lease with a term of 12 months or less and does not include a purchase option.

Review the accounting treatment for short-term leases under current standards (e.g., IFRS 16 or ASC 842). Short-term leases are typically exempt from the requirement to recognize a right-of-use asset and lease liability on the balance sheet.

Consider the practical expedient provided by the standards, which allows entities to not recognize assets or liabilities for short-term leases. Instead, lease payments are expensed directly in the income statement.

Evaluate the options provided in the question. Since short-term leases do not require recognition of a right-of-use asset or lease liability, the correct description aligns with the option stating 'No asset or liability is recognized on the balance sheet.'

Conclude that the balance sheet effect of a short-term lease under current accounting standards is that no asset or liability is recognized, as the lease payments are treated as an expense.