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Basic Question 5 of 15
In accounting for a capital lease, the lessor debits a leased asset account for the present value of the minimum lease payments. True or False?
User Contributed Comments 10
| User | Comment |
|---|---|
| gsuwp | Nothing is recorded at initiation. |
| mtcfa | The net invetment in the lease is recorded: it = PV of mlp's PLUS PV of residual value. |
| Masterkang | mtcfa is right, "nothing is recorded at initiation" is plainly wrong. |
| danrow | Someone can explain this? Is it that it is actually a credit to an Asset account? |
| leases | Leased Asset Account - Credit (-) Lease Receivable Account - Debit (+) |
| bundy | I was assuming the residual was zero ...don't assume debits leased asset account for PV of lease payments and PV of residual |
| johntan1979 | For lessor, you don't credit or debit a leased asset account. You replace it with net investment in lease. |
| johntan1979 | Sorry, leases is right. Credit lease asset acct, debit lease receivable acct. |
| robbiecow | Under a capital lease the lessor will remove the asset from its balance sheet and replace it with a receivable for the present value of the minimum lease payments. |
| Freddie33 | Of course leases is right. This chapter is about him/he |
Your review questions and global ranking system were so helpful.
Lina
Learning Outcome Statements
explain the financial reporting of leases from the perspectives of lessors and lessees
CFA® 2025 Level I Curriculum, Volume 2, Module 8.