In order to properly record a direct-financing lease, the lessor needs to know how to calculate the lease receivable. The lease receivable in a direct-financing lease is best defined as
A) the amount of funds the lessor has tied up in the asset which is the subject of the direct-financing lease.
B) the difference between the lease payments receivable and the fair value of the leased property.
C) the present value of minimum lease payments.
D) the total book value of the asset less any accumulated depreciation recorded by the lessor prior to the lease agreement.

Question

Quizplus · Accepted Answer

The lease receivable in a direct-financing lease is the present value of the minimum lease payments, which includes all required payments over the lease term, including any guaranteed residual value. It represents the amount of cash the lessor expects to collect from the lessee over the lease term. The other options do not accurately define the lease receivable in a direct-financing lease.

In Order to Properly Record a Direct-Financing Lease, the Lessor