Asked by Kennedy Clarkson on Jun 17, 2024
Verified
Executory costs of a lease are treated as operating expenses by the lessee.
Executory Costs
Refers to the expenses incurred in executing a contract, often related to leasing agreements, such as insurance, maintenance, and property taxes.
Operating Expenses
Costs associated with the day-to-day functions of a business, not including the cost of goods sold but typically covering administrative, sales, and general expenses.
- Understand the concept of executory costs in lease agreements and their accounting treatment.
Verified Answer
MH
marcial hamorJun 17, 2024
Final Answer :
True
Explanation :
Executory costs, which include expenses such as maintenance, insurance, and property taxes, are generally the responsibility of the lessee in a lease agreement. As such, they are treated as operating expenses by the lessee.
Learning Objectives
- Understand the concept of executory costs in lease agreements and their accounting treatment.
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