Initial direct costs are:
A)non-refundable down payments made by the lessee.
B)incremental costs incurred by the lessor in negotiating and consummating the lease agreement.
C)insurance, property taxes, and maintenance costs.
D)interest and annual lease rental paid.

Question

Quizplus · Accepted Answer

Initial direct costs are specifically the incremental costs that a lessor incurs in negotiating and consummating a lease agreement. These costs can include commissions, legal fees, and internal costs that are directly attributable to securing the lease agreement. Choices A, C, and D describe other types of costs associated with leases but do not fit the definition of initial direct costs.

Initial Direct Costs Are