Final answer:
The initial direct costs of leasing include explicit and implicit expenses incurred by the lessee, such as fees and opportunity costs, and encompass costs paid to third parties and those related to internal leasing activities. These are expensed in different ways depending on the lease classification. The correct answer is option d. All of the above are true with regard to the initial direct costs of leasing.
Step-by-step explanation:
When a business incurs costs associated with leasing, it encounters a variety of expenses, and understanding these is crucial for financial management. The question asked relates to the nature of the initial direct costs of leasing. These costs can include a broad range of expenses, some of which are immediate out-of-pocket payments, known as explicit costs, such as commissions or fees paid to leasing agents or brokers. Additionally, there are implicit costs involved, which are more nuanced and reflect the opportunity cost of utilizing resources that the business may already own.
Assessing whether the initial direct costs of leasing are generally borne by the lessee, include incremental and internal costs, and how they are expensed in sales-type leases, it is critical to recognize that all the statements mentioned in the question highlight different aspects of initial direct leasing costs. Therefore, the correct response is that all of the provided statements, a, b, and c, are true regarding the initial direct costs of leasing. These costs are comprehensive and include both costs related to the internal activities of leasing and costs paid to external third parties for originating a lease arrangement, which are typically expensed as incurred, depending on the lease's classification.