If the option is reasonably certain to be exercised, how does the inclusion of a provision that gives the lessee the option to purchase the lease asset during the lease term at a specified exercise price impact that accounting for that lease? (Select all that apply.) 

Check All That Apply 

1. The lessor must classify the lease as a sales-type lease. 

2. The lessee has the option of classifying the lease as an operating lease.

3. The lease term is assumed to end on the date that the option is expected to be exercised. 

4. In the present value calculations, the lessor adds the present value of the exercise price to the present value of the periodic lease payments to determine the amount recorded as the lease receivable. 

5. In the present value calculations, the lessee subtracts the present value of the exercise price from the present value of the periodic lease payments to determine the amount recorded as the lease liability.

Answer rating: 100% (QA)

These two only will apply 2 The lessee has the option of clas... View the full answer