An evaluation of the lease contract at its commencement date by Lessee results in the following: ?
Question:
An evaluation of the lease contract at its commencement date by Lessee results in the following:
? Initial direct costs paid by Lessee
? The lease term is 7 years, representing a major part of the economic life of this brand new asset
? It is probable that Lessor will collect the lease payments plus any amount necessary to satisfy the Lessee’s residual value guarantee
? The contract contains variable lease payments that depend on an index
I.How should Lessee classify this lease?
A. An operating lease
B A finance lease
II. Lessor is evaluating the same lease as described above. How should Lessor classify this lease?
A A sales-type lease
B A direct financing lease
C An operating lease
Financial Reporting Financial Statement Analysis and Valuation a strategic perspective
ISBN: 978-1337614689
9th edition
Authors: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw