For a capital lease,the amount recorded initially by the lessee as a liability should
A) exceed the present value at the beginning of the lease term of minimum lease payments during the lease term.
B) exceed the total of the minimum lease payments during the lease term.
C) not exceed the fair value of the leased property at the inception of the lease.
D) equal the total of the minimum lease payments during the lease term.

Question

Quizplus · Accepted Answer

The amount recorded initially by the lessee as a liability for a capital lease should not exceed the fair value of the leased property at the inception of the lease. This is in accordance with accounting standards which state that the liability recorded should be the lower of the fair value of the leased asset or the present value of the minimum lease payments.

For a Capital Lease,the Amount Recorded Initially by the Lessee