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What is Pride Corps appropriate accounting

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Question - On January 1, 2020, Pride Corp. entered into a 4-year lease that does not transfer ownership or contain a purchase option. The economic life of the leased asset, which has an alternative use for the lessor, is 6 years. Also, the present value of the lease payments is 75% of the fair value of the leased asset. What is Pride Corp.'s appropriate accounting?

Classify the lease as a finance lease and amortize the right-of-use asset on a straight-line basis over the lease term of 4 years.

Classify the lease as an operating lease and recognize lease expense for the same amount each period of the lease term.

Classify the lease as a finance lease and amortize the right-of-use asset over a 6-year period.

Classify the lease as an operating lease and record identical amounts each period for interest expense and amortization of the right-of-use asset.

Reference no: EM132885739

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