Question

Based solely upon the following sets of circumstances indicated below, which set gives rise to a sales-type or direct-financing lease of a lessor?

Transfers Contains Collectibility Any
Ownership Bargain of Lease Impt
By End of Purchase Payments Uncertain
Lease Option Assured
a. No Yes Yes No
b. Yes No No No
c. Yes No No Yes
d. No Yes Yes Yes

Answer 1

Option d. No Yes Yes Yes is the set that gives rise to a sales-type or direct-financing lease of a lessor.

Step-by-step explanation:

The set that gives rise to a sales-type or direct-financing lease of a lessor is option d. No Yes Yes Yes. In a sales-type or direct-financing lease, the lessor transfers ownership of the leased asset to the lessee and earns a profit on the lease. In this option, the lessor does not contain collectibility uncertainty, meaning the lessor is assured of receiving the lease payments. Additionally, the lease option is assured at the end of the lease term, and the bargain purchase option implies that the lessee will purchase the leased asset at a price significantly below its fair value.