If the lessor records deferred rent revenue at the beginning of a lease term,the lease must:
A)Be a direct financing lease.
B)Be a sales-type lease.
C)Contain a bargain renewal option.
D)Be an operating lease.

Question

Quizplus · Accepted Answer

Recording deferred rent revenue at the beginning of a lease term indicates that the lease is an operating lease, where rent is recognized on a straight-line basis over the lease term. Direct financing leases and sales-type leases do not involve deferred rent revenue at the beginning of the lease term, and bargain renewal options are not relevant to determining the classification of a lease.

If the Lessor Records Deferred Rent Revenue at the Beginning