The lessor would most likely prefer a ________ or ________ lease to an operating lease. Nonoperating lease treatment would permit a financial service company lessor to remove heavy machinery and equipment, jet airlines, oceangoing vessels, and such from its balance sheet and replace it with the ________, a financial asset compatible with the nature of its business. In addition, the nonoperating lease results in the recognition of ________, rather than ________ revenue.
A) standalone price; sales-type; fair value of the leased asset; financing income; unearned
B) standalone; operating; fair value of the leased asset; interest income; rent
C) direct financing; sales-type; net investment in the lease; interest income; rent
D) direct financing; operating; net investment in the lease; financing income; unearned

Question

Quizplus · Accepted Answer

A lessor would prefer a direct financing or sales-type lease to an operating lease because it allows them to recognize the net investment in the lease as a financial asset and recognize interest income rather than rent.

The Lessor Would Most Likely Prefer a ________ or ________

The Lessor Would Most Likely Prefer a or