Bardo, a lessor, enters into a lease of manufacturing equipment. Which of the following criteria, if met, would cause the lease to be classified as a direct financing lease (assuming it does not otherwise qualify as a sales-type lease)?

Select one:

a.The present value of the sum of the lease payments and any residual value guaranteed by the lessee does not exceed substantially all of the fair value of the underlying asset. When a residual value guarantee provided by a third party unrelated to the lessor is added to those amounts, they equal or exceed substantially all of the fair value of the underlying asset and it is probable that the lessor will collect the lease payment plus any amounts necessary to satisfy a residual value guarantee.

b.Lessors don't account for leases as direct finance leases.

c.The present value of the sum of the lease payments and any residual value guaranteed by the lessee that is not already included in lease payments does not equal or exceed substantially all of the fair value of the underlying asset.

d.The present value of the sum of the lease payments and any residual value guaranteed by the lessee that is not already reflected in the lease payments does not equal or exceed substantially all of the fair value of the underlying asset and the asset has alternative use to the lessor at the end of the lease term.

e.None of these are correct