A noncancellable lease contains a bargain purchase option. The fair value of the asset is greater than the lessor's cost. Collectability of the lease payments is reasonably assured, and no material uncertainties about future costs exist. How will the lessor account for the lease?
A) direct-finance lease
B) operating lease
C) sales-type lease
D) guaranteed lease

Question

Quizplus · Accepted Answer

The lease is a sales-type lease because it includes a bargain purchase option, the fair value of the asset is greater than the lessor's cost, and collectability is reasonably assured.

A Noncancellable Lease Contains a Bargain Purchase Option