Question

No C. D. No No Yes [51 On January 1, Year 1, Lessee entered into a 4-year lease and did not incur initial direct costs. At the lease commencement date, Lessee A. Must discount the lease payments using the lessor's incremental borrowing rate. B. Recognizes the same amount for the right-of-use asset and the lease liability under a finance lease and an operating lease. C. Applies different accounting for initial measurement of a right-of-use asset under finance and operating leases. D. Measures the lease liability at the sum of the present values of the rental payments and the expected residual value of the leased asset 161 On December 30, Year 3, Ames Co. leased equipment under a finance lease for 10 years. It contracted to pay $40,000 annual rent on December 31, Year 3, and on December 31 of each of the next 9 years. The lease liability was recorded at $270,000 on December 30, Year 3, before the first payment. The equipment's useful life is 12 years,

Answer 1

Solution: Recognizes the same amount for the right of use asset and the lease liability under a finance lease and an operating lease

Explanation: The right-of-use asset will be measured and recognised at cost, consisting of initial measurement of direct costs. The adjustments will be needed for incentives on lease, payments prior to or at commencement and restoration obligations.