Which statement is correct for the lessee?
A)If the minimum lease payments exceed fair value of the leased asset,the asset will be recorded on the balance sheet at the higher amount.
B)If the minimum lease payments exceed fair value of the leased asset,the asset will be recorded on the balance sheet at the fair value amount.
C)If the minimum lease payments are lower that the fair value of the leased asset,the asset will be recorded on the balance sheet at the unguaranteed residual value amount.
D)If the minimum lease payments are lower that the fair value of the leased asset,the implicit rate must be used.

Question

Quizplus · Accepted Answer

According to the accounting standards, if the minimum lease payments exceed the fair value of the leased asset, the asset will be recorded on the lessee's balance sheet at the fair value amount. This is because the lessee is effectively paying more than the asset is worth, and therefore, reflects the economic substance of the transaction more accurately.

Which Statement Is Correct for the Lessee