The primary difference between a direct-financing lease and a sales-type lease is the
A) manner in which rental receipts are recorded as rental income.
B) amount of the depreciation recorded each year by the lessor.
C) recognition of the manufacturer's or dealer's profit at (or loss) the inception of the lease.
D) allocation of initial direct costs by the lessor to periods benefited by the lease arrangements.

Question

Quizplus · Accepted Answer

The main difference between a direct-financing lease and a sales-type lease is the recognition of manufacturer's or dealer's profit at the inception of the lease. In a sales-type lease, the seller recognizes profit at the inception of the lease, while in a direct-financing lease, the seller only earns interest on the lease payments. The other options (A, B, and D) are not significant differences between the two types of lease.

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