- 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
Which of the following statements characterizes a sales-type lease?
B. The lessor recognizes both a dealer's profit and interest revenue over the lease term.
C. The lessor recognizes a dealer's profit at inception and interest revenue over the lease term.
D. The lessor recognizes a dealer's profit at inception and interest revenue over the asset life.
A. The lessor recognizes only interest revenue over the lease term.
B. The lessor recognizes both a dealer's profit and interest revenue over the lease term.
C. The lessor recognizes a dealer's profit at inception and interest revenue over the lease term.
D. The lessor recognizes a dealer's profit at inception and interest revenue over the asset life.
Correct Answer: C
In a sales-type lease there are essentially two sources of revenue: sales revenue and financing revenue.
User Contributed Comments 4
| User | Comment |
|---|---|
| kalps | Sales type lease: 2 forms of revenue: (1) Sales revenue (2) The financing revenue over the lease term |
| danlan | Lessor holds the asset over the lease term, then transfer it to lessee, so the interest over lease term only, C and not D. |
| danrow | What is the difference between this question and number seven? shouldn't the profit at inception be spread over the life of the lease agreement? |
| thekapila | Q7 is for lessee, and this is for lessor. |