Answered: Explain the differences in revenue…

Explain the differences in revenue recognition for the lessor in a sales-type lease, a direct financing lease, and an operating 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 13GI: What is the basic difference between the accounting procedures used by a lessor for a sales-type...

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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.

Question

Explain the differences in revenue recognition for the lessor in a sales-type lease, a direct financing lease, and an operating lease.

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Similar questions

Explain the distinction between a direct-financing leaseand a sales-type lease for a lessor.
Describe and demonstrate how the lessor accounts for a sales-type lease with a selling profit.
Rent received in advance by the lessor in an operating lease should be recognized as revenue
Identify the lease classifications for lessors and the criteria that must be met for each classification. What is the relevance of revenue recognition criteria for lessor accounting for leases?
Explain the accounting involved in applying the operating lease method by a lessor.
Why are compound interest concepts appropriate and applicable in accounting for a sales-type lease?
Which of the following statements is true about initial direct costs? A. Initial direct costs of a sales-type lease should be expensed at the commencement of the lease only if no selling profit or loss has been incurred. B. Initial direct costs are ownership-type costs such as insurance, maintenance, and taxes. C. Initial direct costs of an operating lease should be recorded by the lessor as a prepaid asset. D. Initial direct costs should always be debited against income by the lessor in the period of the inception of the lease.
c) A lessor expects some benefits from a lease contract. Explain some benefits.
In accounting for a Type A lease, how are the lessee’s and lessor’s income statements affected?
Which of the following does not affect the computation of the rental income/expense under an operating lease? Contingent rent Lease bonus Security deposits Rental payments
The effect of an operating lease on the income distribution schedule: checked a. is non-existent b. affects only the lessee's income. c. affects only the lessor's income. d. affects the amount of income or distribution of income between the noncontrolling and controlling interests.
This type of lease involves recognition of a manufacturer’s or dealer’s profitor loss on the transfer of the asset to the lessee. A. Operating leaseB. Sale and leasebackC. Sales type leaseD. Direct financing lease.