Refer to the Following Lease Amortization Schedule

Multiple Choice

Refer to the following lease amortization schedule. The 10 payments are made annually starting with the beginning of the lease. Title does not transfer to the lessee and there is no purchase option or guaranteed residual value. The asset has an expected economic life of 12 years. The lease is noncancelable.

-When a lease qualifies as a finance lease, what amount is recorded as the cost of the right-of-use asset?

A) The present value of the lease payments, exclusive of nonlease components.
B) The present value of the lease payments plus nonlease components.
C) The sum of the gross lease payments.
D) The present value of the lease payments plus the present value of nonlease components.