In a finance lease, the amount capitalized is the
A) sum of the lease payments over the life of the lease.
B) fair value of the leased asset on the date the lease is signed.
C) present value of the future lease payments.
D) future value of the asset as of the lease termination date.

Question

Quizplus · Accepted Answer

The amount capitalized in a finance lease is the present value of the future lease payments, which represents the cost of the asset to the lessee. This amount is recorded as a liability on the lessee's balance sheet along with an offsetting asset representing the right to use the leased asset. Options A, B, and D are not correct because they do not represent the actual cost of the asset to the lessee.

In a Finance Lease, the Amount Capitalized Is the