On January 1, 2010, Scarlett signed a lease agreement with Amber.Amber will use the equipment and make ten annual payments of $15, 000 beginning December 31, 2010.The lease is considered to be a sales-type lease.When reading the Scarlett income statement, you would expect to find which of the following accounts?
A)Rent Revenue
B)Interest Revenue
C)Rental Expense
D)Interest Expense

Question

Quizplus · Accepted Answer

As the lease is considered to be a sales-type lease, Scarlett would recognize interest revenue on the lease payments received over the term of the lease. Therefore, the best choice would be option B, Interest Revenue. Rent revenue and rental expense are typically associated with operating leases, while interest expense is not applicable in this scenario as Scarlett is the lessor, not the lessee.

On January 1, 2010, Scarlett Signed a Lease Agreement with Amber.Amber