ASC 842 Lessor Accounting Sales-Type Lease Example

You enter into an eight-year lease of a copier with a lessee, receiving monthly lease payments of $1,000, payable at the beginning of each month. The copier has a 12-year estimated remaining economic life, a carrying amount of $54,000, and a fair value of $62,000 at the commencement date. You are expecting the residual value of the asset to be $20,000 at the end of the lease term, none of which is guaranteed. The lease does not transfer ownership of the underlying asset to the lessee or contain an option for the lessee to purchase the underlying asset. You are incurring $2,000 in initial direct costs in connection with obtaining the lease.

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