B is corrent. Under an operating lease rental revenue is to be recognized in each accounting period on a straight-line basis unless another systematic and rational basis is more representative of the decline in the asset’s service potential.
A is incorrect because rental revenue is earned daily by the lessor as the property is being leased; therefore, deferring revenue recognition until the lease’s expiration would violate the revenue recognition principle.
C is incorrect because the earnings process is not complete at the lease’s inception.
D is incorrect because when the cash is received is irrelevant since revenue recognition is on the accrual basis.
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