Mann Co. is the lessor in a six-year lease beginning December 31, 2013. The agreement specifies that Woo Corp. make equal annual lease payments on December 31 of each year. Under the new ASU, in its 2014 income statement:

Question

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Under the new ASU, both the lessor and lessee are required to classify the lease as a financing lease. Therefore, Woo Corp. will report interest expense and amortization expense in its income statement for the year 2014. Interest expense represents the interest portion of the lease payments, and amortization expense represents the amortization of the leased asset. The lessor, Mann Co., will report interest revenue in its 2014 income statement. Accretion expense and revenue are not applicable in this situation.

Mann Co Is the Lessor in a Six-Year Lease Beginning December