A six-year lease can be renewed for two additional three-year periods, and it also can be terminated after only three years. How do the lessee and lessor decide the lease term to be used in accounting for the lease?

A six-year lease can be renewed for two additional three-year periods, and it also can be terminated after only three years. How do the lessee and lessor decide the lease term to be used in accounting for the lease?

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter20: Accounting For Leases

Section: Chapter Questions

Problem 10GI: Owens Company leased equipment for 4 years at 50,000 a year with an option to renew the lease for 6...

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Concept explainers

Leasing

Leasing is a contractual arrangement in which someone (a lessee) pays the owner (or lessor) of a building, land, vehicle, or other asset for the use of that asset. The lease is the agreement between lessee and lessor.

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