CFA Practice Question

There are 520 practice questions for this study session.

CFA Practice Question

Which of the following statements characterizes a sales-type lease?

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.
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