On January1, Year1, Lessee entered into a 4-year lease that does not transfer ownership or contain a
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Question:
On January1, Year1, Lessee entered into a 4-year lease that does not transfer ownership or contain a purchase option. The economic life of the leased asset, which has an alternative use, is 6years. Also, the present value of the lease payments is 75% of the fair value of the leased asset. If no initial direct costs are incurred, what is the lessee's appropriate accounting?
a) Each period interest expense recognized is equal to the amortization of the right-of-use asset.
b) Recognize lease expense for the same amount each period of the lease term.
c) Amortize the right-of-use asset on a straight-line basis over the lease term of 4years.
d) Amortize the right-of-use asset over a 6-year period.
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