Question

A lessor has an account, Equipment leased to others, and the related account, Accumulated Depreciation: Equipment...

A lessor has an account, Equipment leased to others, and the related account, Accumulated Depreciation: Equipment leased to others , on its year-end balance sheet.How should the lease related to these account be classified?
a) operation lease
b) direct financing lease
c) sales type lease
d) leveraged lease.

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Answer #1

OPTION - A. OPERATING LEASE.

In Operating lease both the lease and asset appear in the balance. The lessor should account for the leased asset with the Depreciation and adjust interest with the lease.

In finance lease, the lessor doesn't adjust the asset, but the lessee adjust the asset with Depreciation only lessor adjust the lease.

In sale type lease the lessor recognizes only the profits or losses caused on leases.

In leverages lease the lessee account for the asset but not the lessor.

If you have any doubts please comment on the answer

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