Final answer:
d. All of these, as the initial direct costs are treated differently in each type of lease.
In a direct-financing lease, initial direct costs are added to the net investment in the lease. In a sales-type lease, initial direct costs are expensed in the year of incurrence.
For operating leases, initial direct costs are deferred and allocated over the lease term.
Step-by-step explanation:
In a direct-financing lease, the initial direct costs are added to the net investment in the lease. This means that the costs are capitalized and added to the value of the leased asset.
On the other hand, in a sales-type lease, initial direct costs are expensed in the year they are incurred. This means that the costs are recorded as an expense in that particular year.
For operating leases, the initial direct costs are deferred and allocated over the lease term. This means that the costs are spread out and recognized as an expense over the duration of the lease.
Therefore, the correct statement is d. All of these, as the initial direct costs are treated differently in each type of lease.
The correct statement regarding how initial direct costs are handled in different lease types is: c. For operating leases, initial direct costs are deferred and allocated over the lease term.
This aligns with the accounting treatment where such costs incurred by the lessor are included in the initial measurement of the lease receivable and recognized over the lease term in a pattern reflecting the lease income. Options a and b,
referring to direct-financing and sales-type leases, are incorrect since initial direct costs are capitalized and recognized over the lease term for both types of leases.