Which of the following statements is correct?

Question

Quizplus · Accepted Answer

A) In a direct-financing lease, initial direct costs are added to the net investment in the lease.
B) In a sales-type lease, initial direct costs are expensed in the year of incurrence.
C) For operating leases, initial direct costs are deferred and allocated over the lease term.

All of these statements are correct. The treatment of initial direct costs varies depending on the type of lease. In a direct-financing lease, initial direct costs are added to the net investment in the lease. In a sales-type lease, initial direct costs are expensed in the year of incurrence. For operating leases, initial direct costs are deferred and allocated over the lease term.

Which of the Following Statements Is Correct