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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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What is the basic difference between the accounting procedures used by a lessor for a sales-type lease and those used for a direct-financing lease?

To determine

Explain the basic difference between the accounting procedures used by a lessor for a sales-type lease and direct-financing lease.

Explanation

Lease: Lease is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.

In the direct financing lease, the lease does not transfer the complete control of the asset to the lessee due to involvement of third party...

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