If the option is reasonably certain to be exercised, how does the inclusion of a provision that gives the lessee the option to purchase the lease asset during the lease term at a specified exercise price impact that accounting for that lease

The lessor must classify the lease as a sales-type lease"

The lease term is assumed to end on the date that the option is expected to be exercised

In the present value calculations, the lessor adds the present value of the exercise price to the present value of the periodic lease payments to determine the amount recorded as the lease receivable

Explanation:

In the given case, when the lessee have the option to buy the lease asset at the time of the lease term so the provision should include the following

a. the lease should be categorized like sales type lease

b. The term of the lease should be assumed to the date end where the option is predicetd to be exercised

c, And in the calculation of the present value, the lessor add the exercise price present value with the periodic lease payment present value in order to calculate the amount recognized as the lease receivable

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