Question: On January 1, 2009, Goliath entered into a five-year operating lease for equipment. In January 2011, Goliath decided that it no longer needs the equipment

On January 1, 2009, Goliath entered into a five-year operating lease for equipment. In January 2011, Goliath decided that it no longer needs the equipment and terminates the contract by paying a penalty of $3,000. How should Goliath account for the lease termination costs?

a. Recognize $3,000 termination cost in 2011 as a loss from continuing operations.

b. Recognize $1,000 termination cost each year for the remaining three years of the lease term.

c. Recognize the $3,000 termination cost as an extraordinary item in 2011.

d. Recognize the $3,000 termination cost as a discontinued operation in 2011.

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