When is it appropriate for the lessee to use the lessor's implicit rate to discount the minimum lease payments?
A)whenever the lessee knows what the lessor's rate is
B)when the lessor's rate is higher than the lessee's incremental borrowing rate
C)when the lessee's incremental borrowing rate is lower than the lessor's rate
D)when the lessor's implicit rate is lower than the lessee's incremental borrowing rate

Question

Quizplus · Accepted Answer

When the lessor's implicit rate is lower than the lessee's incremental borrowing rate, the lessee should use the lessor's implicit rate to discount the minimum lease payments. This is because the lessee will be able to obtain a lower financing rate from the lessor than it could from other sources.

When Is It Appropriate for the Lessee to Use the Lessor's