Which of the Following Statements Is Correct

question 58

Multiple Choice

Which of the following statements is correct?

• A)In a direct-financing lease, initial direct costs are added to the net investment in the lease.
• B)In a sales-type lease, initial direct costs are expensed in the year of incurrence.
• C)For operating leases, initial direct costs are deferred and allocated over the lease term.
• D)All of these.

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Definitions:

Plant Assets

Long-term tangible assets used in the operation of a business that are not intended for sale.

Recognized Immediately

The principle of recording revenues or expenses in the accounting period when they occur, regardless of when cash is received or paid.

Asset Turnover

A financial ratio indicating how efficiently a company uses its assets to generate sales.

Average Total Assets

A measure that calculates the mean value of a company's assets over a specific period, often used to assess how efficiently these assets are used.