This video shows how to account for a sales-type lease from the lessor’s perspective. At the outset of the lease, the lessor recognizes a lease receivable and sales revenue (as if the asset had been sold to the lessee). Then the lessor recognizes cost of goods sold and reduces its inventory to get the leased asset off its books. The lessor sets up an effective interest table and recognizes interest revenue each period over the lease term. At the end of the lease term, the lessor increases its inventory when it receives the leased asset from the lessee.