A lessor reports rental revenue if it classifies the leased asset as inventory and reports a gain on leased asset if it classifies the leased asset as property, plant, and equipment.

Question

Quizplus · Accepted Answer

A lessor reports rental revenue when it leases out an asset classified as property, plant, and equipment, not inventory. If the asset is classified as inventory, the lessor recognizes revenue from the sale of the asset, not rental revenue.

A Lessor Reports Rental Revenue If It Classifies the Leased