What is the accounting treatment for lease expenses by a lessee?

• A. The lessee records a lease expense consisting of an amortization component and an interest component.
• B. The lessee records the entire lease payment as an expense in the period due.
• C. The lessee capitalizes the lease as a fixed asset and depreciates it.
• D. The lessee records only the interest portion as expense.

Answer: (B)

Lease expenses depend on how the lease is classified for the lessee. In an operating lease, the lessee generally records the lease payment as a rent expense in the period it’s due, so the entire cash outlay is expensed in that period. This matches the statement that the full lease payment is expensed when due. If the lease were a finance (capital) lease, the accounting would instead split the cost into depreciation (amortization) of the right-of-use asset and interest on the lease liability, so the expense would be a combination of these two amounts rather than the full cash payment being expensed each period. The other descriptions describe different patterns (capitalizing the lease as an asset with depreciation, or expensing only the interest), which don’t reflect the typical operating-lease treatment.