Question

The right-of-use asset is increased by

lease incentives received.

lease prepayments made by the lessee and initial direct costs incurred by the lessee.

lease incentives received.

initial direct costs incurred by the lessee only.

Answer 1

The right-of-use asset is increased by lease incentives received, lease prepayments made by the lessee, and initial direct costs incurred by the lessee.

Step-by-step explanation:

The subject of this question is Business. The question is asking about the impact of lease incentives received, lease prepayments made by the lessee, and initial direct costs incurred by the lessee on the right-of-use asset.

The right-of-use asset is increased by lease incentives received, lease prepayments made by the lessee, and initial direct costs incurred by the lessee. Lease incentives received, such as cash or rent reductions provided by the lessor, are recognized as a reduction of the right-of-use asset over the lease term. Lease prepayments made by the lessee, which are payments made in advance for future lease periods, are initially recognized as an increase in the right-of-use asset and subsequently amortized over the lease term. Initial direct costs incurred by the lessee, such as legal fees or commission costs, are also recognized as an increase in the right-of-use asset and subsequently amortized over the lease term.