The primary difference between a direct-financing lease and a sales-type lease under SFAS No.13 is the
A)Recognition of the manufacturer's or dealer's profit at or loss)the inception of the lease
B)Amount of the depreciation recorded each year by the lessor
C)Allocation of initial direct costs by the lessor to periods benefited by the lease arrangements
D)Manner in which rental receipts are recorded as rental income

Question

Quizplus · Accepted Answer

The primary difference between a direct-financing lease and a sales-type lease under SFAS No.13 is the recognition of the manufacturer's or dealer's profit at the inception of the lease. In a direct-financing lease, the lessor only recognizes interest income over the lease term, while in a sales-type lease, the lessor recognizes both interest income and profit at the inception of the lease. The other options (B, C, and D) are not significant differences between these two types of leases.

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