The beginning of a six$-$year finance lease...

The beginning of a six$-$year finance lease is December $31,2024.$ The agreement specifles equal annual lease payments on December $31$ of each year.

For the lessee, the first payment on December $31,2024,$ includes:

Interest

Reduction of the Lease

If it is "reasonably certain" that the lessee will exercise a purchase option:

Multiple Choice

The lease is classified as a finance$/$sales$-$type lease.

Both the lessee and the lessor consider the exercise price of the option to be an additional cash po

It's assumed that the lease term ends on the date that the option is expected to be exercised.

All of these answer choices are correct.