If the lessor records unearned rent 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

Unearned rent is a liability account that reflects the rent that has been paid by the lessee but has not yet been earned by the lessor. This is commonly associated with operating leases, where rent payments are made in advance. Direct financing leases and sales-type leases involve recognition of income rather than deferred income (unearned rent). A bargain renewal option is not necessarily relevant to the classification of a lease.

If the Lessor Records Unearned Rent at the Beginning of a Lease