Which of the Following Statements Is True About Initial Direct

Multiple Choice

Which of the following statements is true about initial direct costs?

A) Initial direct costs should always be debited against income by the lessor in the period of the inception of the lease.
B) Initial direct costs are ownership-type costs such as insurance, maintenance, and taxes.
C) Initial direct costs of an operating lease should be recorded by the lessor as a prepaid asset.
D) Initial direct costs of a sales-type lease should be expensed as incurred, and an equal amount of the unearned income should be recognized as income in the same period.