If 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, the lease relating to the accounts would be classified as a(n)
A)operating lease
B)direct financing lease
C)sales-type lease
D)leveraged lease

Question

Quizplus · Accepted Answer

The accounts Equipment Leased to Others and Accumulated Depreciation: Equipment Leased to Others indicate that the lessor is leasing equipment to others and depreciating it over time. This is characteristic of an operating lease, where the lessor retains ownership of the equipment and the lessee only uses it for a limited period of time. Direct financing leases involve the lessor financing the purchase of the equipment for the lessee, while sales-type leases involve the lessor recognizing a profit on the sale of the asset to the lessee. Leveraged leases involve a third party providing additional financing to the lessor. None of these scenarios are indicated by the accounts listed in the question.

If a Lessor Has an Account, Equipment Leased to Others