When a lease qualifies as a capital lease,what is the cost basis of the asset acquired?
A)The present value of the minimum lease payments,exclusive of executory costs.
B)The present value of the minimum lease payments plus executory costs.
C)The sum of the gross minimum lease payments.
D)The present value of the minimum lease payments plus the present value of executory costs.

Question

Quizplus · Accepted Answer

According to GAAP, when a lease qualifies as a capital lease, the lessee recognizes the asset and a corresponding liability on their balance sheet. The cost basis of the asset acquired is equal to the present value of the minimum lease payments (excluding executory costs) at the inception of the lease. This amount represents the fair value of the asset being leased. The present value is calculated using the lessee's incremental borrowing rate or the implicit rate in the lease, if known.

When a Lease Qualifies as a Capital Lease,what Is the Cost