Under anticipated changes, the lessee would record which asset on the balance sheet?

• A. No asset is recorded.
• B. Asset equal to the fair value of the asset.
• C. Asset equal to the right-to-use asset and present value of lease payments.
• D. Asset equal only to the present value of lease payments.

Answer: (C)

This tests how a lessee shows assets and liabilities when a lease is recognized. The key idea is that the lessee records a right-to-use asset for the period they have the right to use the underlying asset, and a lease liability representing the obligation to make lease payments. The lease liability is measured at the present value of those payments.

So, at the start of the lease, you recognize the right-to-use asset on the balance sheet and a separate liability equal to the present value of the lease payments due over the term. The asset on the balance sheet is the right-to-use asset, and the corresponding liability is the present value of lease payments. This combination is why the described option (asset reflecting the right-to-use asset together with the present value of lease payments) aligns with how the lease is reported.