CFA Practice Question

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CFA Practice Question

If a lessor appropriately classifies a lease as a sales-type lease, the following items related to the lease should be reported on the lessor's income statement in the first year of the lease:

I. Rental revenue
II. Interest revenue
III. Depreciation expense
IV. Income (loss) on sale of leased property
A. II, III, and IV only
B. I and III only
C. II and IV only
Explanation: Rental revenue is only recognized in an operating lease. If it is a sales-type lease, there is profit on the sale as well as interest revenue on the receivable. As the lessor no longer reports the asset on its records, it does not record depreciation on it.

User Contributed Comments 2

User Comment
davcer lessor!
birdperson good explanation AN
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