{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Week 5 Discussion Question 2

Week 5 Discussion Question 2 - Week 5 Discussion Question 2...

Info icon This preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Week 5 Discussion Question 2: What are the differences between a direct financing and a sales type lease for the lessor? A direct financing lease is used by lessor in capital leases, when both of the following criteria for the lessor are met: Collectibility of minimum lease payments is assured; and No important uncertainties surround the amount of unreimbursable costs yet to be incurred. The lessor of a direct financing lease obtains property for the sole purpose of leasing the property. In using a direct financing lease, the lessor uses the interest rate implicit in the lease to discount the future payments from the lease. The difference between the gross investment in the lease and the cost of the leased property is reported as unearned interest income. Unearned interest income is the amortized using the interest method, therefore resulting in interest income over the life of the lease. Initial direct costs of the lease are expensed.
Image of page 1
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern