Any Initial Direct Costs Incurred by the Lessor for a Lease

Multiple Choice

Any initial direct costs incurred by the lessor for a lease agreement that is classified as an operating lease should be

A) expensed in the same period that the expenditure is made
B) recorded as a prepaid asset and allocated to expense over the lease term
C) deferred and recognized as a reduction in the interest rate implicit in the lease
D) directly charged (debited) to Retained Earnings