Final answer:
The lessor would record lease revenue and lease receivable but not a right-of-use asset, which is recorded by the lessee. The correct answer is option C: right-of-use asset.
Step-by-step explanation:
Lease Accounting
In the context of accounting for leases, a lessor is the entity that owns the asset and provides it for use to another party, called the lessee, under the terms of a lease agreement. When recording transactions related to a lease, the lessor would typically recognize lease revenue and lease receivable. Lease revenue is the income earned from leasing out the asset, while lease receivable is the asset account that represents the right to receive payments from the lessee under the lease terms.
On the other hand, the lessor would not record a right-of-use asset. The right-of-use asset is an accounting construct that the lessee records on their balance sheet to represent their right to use the leased asset over the lease term. This asset is typically accompanied by a lease liability on the lessee's balance sheet, representing their obligation to make lease payments. The lessor does, however, record interest revenue, which represents the profit earned from the financial component of a lease transaction when the lease is classified as a finance lease.
Therefore, the correct answer to the question is option C: The lessor would not record a right-of-use asset in connection with a lease.