Under ASC 840, a lessee must use which one of the following discount rates to value a capital lease?

Multiple Choice

• Prime rate.

• Lower of the known implicit lease rate or lessees incremental borrowing rate.

• Lower of implicit lease rate or prime lending rate.

• Lessees incremental borrowing rate.

A lessor mistakenly treated a direct financing lease as an operating lease. How does this mistake impact the following at the end of the first year of the lease term?

Rent/Lease Revenue

Interest Revenue

Multiple Choice

• Overstated

  Understated

• Understated

  Understated

• Overstated

  Overstated

• Understated

  Overstated