- CFA Exams
- CFA Level I Exam
- Topic 4. Financial Statement Analysis
- Learning Module 8. Topics in Long-Term Liabilities and Equity
- Subject 4. Accounting and Reporting by the Lessor
CFA Practice Question
How does a lessor determine the net investment in a capital lease?
B. It is the difference between the balances in the "gross investment in leased asset" account and the "unearned financing income" account.
C. It is the balance in the "net investment in leased asset" account.
A. It is the sum of the balances in the "gross investment in leased asset" account and the "unearned financing income" account.
B. It is the difference between the balances in the "gross investment in leased asset" account and the "unearned financing income" account.
C. It is the balance in the "net investment in leased asset" account.
Correct Answer: B
On the lessor's books, the leased asset is removed and replaced with these two accounts, which represent the net investment of the lease.
User Contributed Comments 5
| User | Comment |
|---|---|
| kalps | Difference between: Gross investment in leased asset - unearned financing = net investment in a capital lease |
| mtcfa | And is also equivalent to the PV of the lease payments plus the present value of the residual value. |
| gill15 | nice mtcfa |
| Shaan23 | I dont know what B means but I understand MTCFA. |
| CJHughes | Determine the Net (difference). Option 2 |