Question

24. A direct financing lease differs from a sales type lease in that a. the sales...

24. A direct financing lease differs from a sales type lease in that

a. the sales type lease provisions can not have a bargain purchase option.

b. the direct financing lease provisions can not transfer ownership.

c. the sales type lease does not involve interest revenue.

d. the direct financing lease does not have a dealer profit.

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Answer #1

Answer

Option D is right

Diffence between a direct financing and sales-type:

sales-type involves manufacture's or dealer's profit(loss) and a direct financing lease does not.

A sales-type lease provides the dealer with a profit on the sale of the asset in addition to interest revenue earned. The profit derives from the difference between the fair value of the asset, or selling price, and the carrying value of the asset sold. The lessor uses the same accounting treatment as a direct-finance lease; however, profit is recognized at the inception of the lease.

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