Sales Type Lease Quiz

What is a Sales Type Lease?

• A lease where the lessor is a financial institution

• A lease where the lessor is a manufacturer or dealer

• A lease where the lessee sells the asset to the lessor

• A lease where the lessee owns the asset

How is the Gross Investment calculated in a Sales Type Lease?

• The present value of the gross rentals only

• The gross rentals for the entire lease term

• The present value of the residual value only

• The gross rentals for the entire lease term plus the absolute amount of the residual value

How is Unearned Interest Income treated in a Sales Type Lease?

• Recognized as revenue immediately

• Expensed immediately as part of cost of goods sold

• Recognized over the lease term

• Ignored in the accounting process

What is the difference between Gross Investment and Net Investment in a Sales Type Lease?

• Gross Investment includes initial direct costs

• Net Investment includes the present value of unguaranteed residual value

• Gross Investment is equal to the present value of lease payments

• Net Investment is equal to the cost of the asset sold

How is Gross Income calculated in a Sales Type Lease?

• Equal to the net investment in the lease

• Equal to the present value of lease payments

• Equal to the cost of the asset sold minus the present value of unguaranteed residual value

• Equal to the sales revenue minus cost of goods sold

What is the treatment of residual value in a guaranteed scenario in a Sales Type Lease?

• Included in sales revenue

• Included in cost of goods sold

• Ignored in the accounting process

• Recognized as unearned interest income

How is the residual value treated in an unguaranteed scenario in a Sales Type Lease?

• Included in sales revenue

• Included in cost of goods sold

• Ignored in the accounting process

• Recognized as unearned interest income

What happens when a lessor actually sells an asset that has been leased under a finance lease?

• The carrying amount of the lease receivable is ignored

• A gain or loss on disposal is recognized

• The residual value is included in the gross income

• The unearned interest income is deducted from the sales revenue

What additional disclosures are required for lessors in a finance lease?

• Selling profit or loss

• Finance income on the net investment in the lease

• Income relating to variable lease payments

• All of the above

What type of information should a lessor disclose about its leasing activities?

• Information about the lessee

• Information about the lessor's risk management strategy

• Information about the lessor's competitors

• Information about the lessor's marketing strategy