The costs that (a) are associated directly with consummating a lease, (b) are essential to acquire the lease, and (c) would not have been incurred had the lease agreement not occurred, are referred to as initial direct costs. Initial direct costs incurred by the lessor are deferred and expensed over the lease term:
A) Only in an operating lease.
B) Only in a sales-type lease with selling profit.
C) Only in a sales-type lease with no selling profit.
D) In both an operating lease and a sales-type lease with no selling profit.

Question

Quizplus · Accepted Answer

Initial direct costs incurred by the lessor are deferred and expensed over the lease term in both an operating lease and a sales-type lease with no selling profit.

The Costs That (A) Are Associated Directly with Consummating a Lease