- 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
In accounting for a capital lease, the lessor debits a leased asset account for the present value of the minimum lease payments. True or False?
Correct Answer: False
User Contributed Comments 10
| User | Comment |
|---|---|
| gsuwp | Nothing is recorded at initiation. |
| mtcfa | The net invetment in the lease is recorded: it = PV of mlp's PLUS PV of residual value. |
| Masterkang | mtcfa is right, "nothing is recorded at initiation" is plainly wrong. |
| danrow | Someone can explain this? Is it that it is actually a credit to an Asset account? |
| leases | Leased Asset Account - Credit (-) Lease Receivable Account - Debit (+) |
| bundy | I was assuming the residual was zero ...don't assume debits leased asset account for PV of lease payments and PV of residual |
| johntan1979 | For lessor, you don't credit or debit a leased asset account. You replace it with net investment in lease. |
| johntan1979 | Sorry, leases is right. Credit lease asset acct, debit lease receivable acct. |
| robbiecow | Under a capital lease the lessor will remove the asset from its balance sheet and replace it with a receivable for the present value of the minimum lease payments. |
| Freddie33 | Of course leases is right. This chapter is about him/he |