A direct financing lease differs from a sales-type lease in that
A)the direct financing lease does not have a dealer profit, although it may have a dealer loss
B)the direct financing lease provisions cannot include a bargain purchase option
C)the sales-type lease does not have unearned interest income at the inception of the lease
D)the direct financing lease does not have a dealer profit or loss

Question

Quizplus · Accepted Answer

In a direct financing lease, the lessor does not recognize any dealer or manufacturer's profit or loss at the inception of the lease. This is because the lessor is simply financing the asset, not selling it. In contrast, a sales-type lease involves the lessor selling the asset to the lessee, which can result in a profit or loss at the inception of the lease.

A Direct Financing Lease Differs from a Sales-Type Lease in That