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Profit in a SALES Type Lease
Profit in a SALES Type Lease
Remember that in a sales-type lease (called a finance lease from the lessee's perspective), the lessor transfers control of an asset to the lessee. Effectively, the lease arrangement is a sale.
What happens if the value of the lease payments exceed the value of the asset?
What happens if the value of the lease payments exceed the value of the asset?
Answer: Lessor records profit
How does the accounting change?
How does the accounting change?
From the lessee's perspective, there is no change. From the lessor's perspective, only the initial journal entry needs to change. Here's the previous example, except now the cost of the equipment is $300,000.
From the lessee's perspective, there is no change. From the lessor's perspective, only the initial journal entry needs to change. Here's the previous example, except now the cost of the equipment is $300,000.
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