Under SFAS No.13,for a lease that is recorded as a sales-type lease by the lessor,the difference between the gross investment in the lease and sum of the present values of the components of the gross investment should be recognized as income
A)In full at the lease's expiration
B)In full at the lease's inception
C)Over the period of the lease using the interest method of amortization
D)Over the period of the lease using the straight-line method of amortization

Question

Quizplus · Accepted Answer

For a sales-type lease under SFAS No.13, the difference between the gross investment in the lease and the sum of the present values of the components of the gross investment should be recognized as income in full at the lease's inception. This is because the lessor has essentially sold the leased asset to the lessee and is recognizing the profit upfront.