The primary difference between a direct-financing lease and a sales-type lease is the manufacturer's or dealer's gross profit (or loss).

Question

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In a direct-financing lease, the manufacturer or dealer earns interest income but does not recognize a gross profit on the transaction. In a sales-type lease, however, the manufacturer or dealer earns a gross profit (or incurs a gross loss) on the transaction, in addition to interest income.

The Primary Difference Between a Direct-Financing Lease and a Sales-Type