On January 1, 2005, Golf Tee Inc. will acquire a vehicle from a car dealership for $50,000. The dealership offers to lease the vehicle to Golf Tee Inc. for five years with payments of $12,462 due on December 31 of each year. The expected resale value of the car after five years is $0, and the borrowing rate for Golf Tee Inc. is 12%. By simply examining the terms, do you believe this lease qualifies as a capital lease or an operating lease? Explain.

Answer rating: 100% (QA)

This is a Capital lease because it covers maximum life of the asset Rea... View the full answer