Question

In which of the following scenarios would the short-cut method be permissible? A) A lease term of 6 months with an option to renew for an additional 7 months. B) A lease term of 8 months with a bargain purchase option if the lease is extended to 24 months. C) A lease term of 3 months with an option to extend for an additional 9 months. D) A lease term of 24 months with a bargain purchase option exercisable at 18 months

Answer 1

A) A lease term of 6 months with an option to renew for an additional 7 months.

Step-by-step explanation:

In the short-cut approach both the lessee and lessor can choose to not to record the lease in the beggining.