Any initial direct costs incurred by the lessor for a sales-type lease should be
A)expensed in the same period that the lease receivable is recognized
B)recorded as a prepaid asset and allocated to expense over the lease term
C)deferred and recognized as a reduction in the interest rate implicit in the lease
D)directly charged (debited)to Retained Earnings

Question

Quizplus · Accepted Answer

In a sales-type lease, the lessor recognizes any initial direct costs as an expense in the period the lease receivable is recognized, as these costs are associated with the sale of the leased asset.

Any Initial Direct Costs Incurred by the Lessor for a Sales-Type