Question: In January 2009, Hopper Corp. signed a capital lease for equipment with a term of twenty years. In 2011, Hopper negotiated a modification to a

In January 2009, Hopper Corp. signed a capital lease for equipment with a term of twenty years. In 2011, Hopper negotiated a modification to a capital lease that resulted in the lease being reclassified as an operating lease. Hopper calculated the company had a gain of $8,000 on the lease modification. Hopper retains all rights to use the property during the remainder of the lease term. How should Hopper account for the lease modification?

a. Recognize an $8,000 gain from lease modification during 2011.

b. Defer the gain and recognize it over the life of the operating lease.

c. Recognize the $8,000 gain as an extraordinary item in 2011.

d. Recognize the $8,000 gain as a discontinued operation in 2011.

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