If the Lessor Incurs Initial Direct Cost to Bring About

question 13

Multiple Choice

If the lessor incurs initial direct cost to bring about the lease,when are those costs expensed in total during the first year of the lease term?

• A)When the lease is classified as a sales-type lease.
• B)When the lease is classified as a direct financing lease.
• C)When the lease is classified as an operating lease.
• D)Initial direct costs are always expensed during the first year of the lease term.

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Definitions:

Trademarks

Symbols, names, phrases, or logos registered or established by use as representing a company or product.

Goodwill

The intangible asset that arises when a business is acquired for more than the fair value of its net identifiable assets, representing future economic benefits.

Allocation

The distribution of a cost or expense across multiple departments, projects, or activities based on a predetermined criterion.

Depletion

The allocation of the cost of natural resources over their useful life, typically used in the mining, timber, petroleum, and similar industries.