Question

In: Accounting

For a capital lease with no salvage value or bargain purchase option, the amount recorded initially...

For a capital lease with no salvage value or bargain purchase option, the amount recorded initially by the lessee as the leased asset should normally:

Select one:

a. Exceed the total of the minimum lease payments.

b. Exceed the present value of the minimum lease payments at the beginning of the lease.

c. Equal the total of the minimum lease payments.

d. Equal the present value of the minimum lease payments at the beginning of the lease.

Solutions

Expert Solution

Answer: Option D - Equal the present value of the minimum lease payments at the
beginning of the lease
Explanation
Amount recorded for Capital lease Asset in the books of lessee will be lower of:
1) Fair value of asset
2) Present value of minimum lease payments
Present value of minimum lease payments will be calculated using discount rate
implicit in the lease or incremental borrowing rate can be used.

ekkarill92 answered 2 years ago
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