Which of the following statements pertaining to lease accounting under ASC 840 i

Question

Which of the following statements pertaining to lease accounting under ASC 840 is not correct?

The lessee will depreciate a leased asset either over the lease term or the leased asset’s useful life dependent upon which of the required lease capitalization criteria is (are) met.

The lessee ignores a guaranteed salvage value when calculating depreciation expense associated with a capital lease.

The lessor’s annual income will decrease over time regardless of whether the lease is a sales-type lease or a direct financing lease.

The manufacturer’s or dealer’s profit recorded by the lessor is the same whether or not the residual value is guaranteed by the lessee.

Explanation / Answer

Ans .The lessee ignores a guaranteed salvage value when calculating depreciation expense associated with a capital lease.

Correct point is : The lessee takes into consideration the guaranteed salvage value when calculating depreciation expense associated with a capital lease.

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