C is corrent. Per ASC Topic 840, the lessee records as a liability the lower of the present value of the minimum lease payments (excluding executory costs), or the fair value of the leased asset. Minimum lease payments for the lessee include the minimum rental payments and the amount of any bargain purchase option if exercise of the option appears reasonably assured. Since the fair value of the leased asset is not given, the leased asset and lease obligation are recorded as the present value of the minimum lease payments, as computed below. | Present value of annual rental $200,000 x 6.76 | $1,352,000 | | Present value of bargain purchase option $250,000 x .39 | 97,500 | | Present value of minimum lease payments | $1,449,500 |
A is incorrect. Per ASC Topic 840, the lessee records as a liability the lower of the present value of the minimum lease payments (excluding executory costs), or the fair value of the leased asset. Minimum lease payments for the lessee include the minimum rental payments and the amount of any bargain purchase option if exercise of the option appears reasonably assured. Since the fair value of the leased asset is not given, the leased asset and lease obligation are recorded as the present value of the minimum lease payments, as computed below. | Present value of annual rental $200,000 x 6.76 | $1,352,000 | | Present value of bargain purchase option $250,000 x .39 | 97,500 | | Present value of minimum lease payments | $1,449,500 |
B is incorrect. Per ASC Topic 840, the lessee records as a liability the lower of the present value of the minimum lease payments (excluding executory costs), or the fair value of the leased asset. Minimum lease payments for the lessee include the minimum rental payments and the amount of any bargain purchase option if exercise of the option appears reasonably assured. Since the fair value of the leased asset is not given, the leased asset and lease obligation are recorded as the present value of the minimum lease payments, as computed below. | Present value of annual rental $200,000 x 6.76 | $1,352,000 | | Present value of bargain purchase option $250,000 x .39 | 97,500 | | Present value of minimum lease payments | $1,449,500 |
C is incorrect. Per ASC Topic 840, the lessee records as a liability the lower of the present value of the minimum lease payments (excluding executory costs), or the fair value of the leased asset. Minimum lease payments for the lessee include the minimum rental payments and the amount of any bargain purchase option if exercise of the option appears reasonably assured. Since the fair value of the leased asset is not given, the leased asset and lease obligation are recorded as the present value of the minimum lease payments, as computed below. | Present value of annual rental $200,000 x 6.76 | $1,352,000 | | Present value of bargain purchase option $250,000 x .39 | 97,500 | | Present value of minimum lease payments | $1,449,500 |
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