Callaway Golf Co. leases telecommunications equipment. Assume the following data for equipment leased from Photon Company. The
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Callaway Golf Co. leases telecommunications equipment. Assume the following data for equipment leased from Photon Company. The lease term is 5 years and requires equal rental payments of $31,000 at the beginning of each year. The equipment has a fair value at the inception of the lease of $138,000, an estimated useful life of 8 years, and no residual value. Callaway pays all executory costs directly to third parties. Photon set the annual rental to earn a rate of return of 10%, and this fact is known to Callaway. The lease does not transfer title or contain a bargain purchase option.
How should Callaway classify this lease?
Related Book For
Accounting
ISBN: 978-1337899451
27th edition
Authors: Carl S. Warren, James M. Reeve, Jonathan Duchac
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