One of the Distinguishing Characteristics of a Direct Financing Lease

question 107

Multiple Choice

One of the distinguishing characteristics of a direct financing lease is that

• A)the lessor is normally a dealer or manufacturer
• B)the net investment in the lease is equal to the cost of the asset or carrying value of the asset
• C)the lease has two sources of earnings: interest revenue and profit or loss from the asset exchange
• D)the property related to the lease remains on the lessor's balance sheet during the term of the lease

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Definitions:

Continuing Operations

Part of a company's business that is expected to continue operating into the foreseeable future, excluding any discontinued operations.

Unusual Items

Nonrecurring or unique charges or gains that are not expected to happen regularly, such as costs from lawsuits, restructuring, or natural disasters, that are reported separately in a company's financial statements.

Accounting Principles

Principles that provide the framework upon which accounting standards are constructed.

Common-Sized Financial Statements

Financial statements that present all line items as a percentage of a common base figure, facilitating comparison across periods or companies.