Problem 3-2 Extra lease problem for review

Problem 3-2 Extra lease problem for review - Problem 3-3(30...

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Problem 3-3 (30 minutes) a. A lease should be classified as a capital lease when it transfers substantially all of the benefits and risks inherent to the ownership of property by meeting any one of the four criteria for classifying a lease as a capital lease. Specifically: Lease J should be classified as a capital lease because the lease term is equal to 80 percent of the estimated economic life of the equipment, which exceeds the 75 percent or more criterion. Lease K should be classified as a capital lease because the lease contains a bargain purchase option. Lease L should be classified as an operating lease because it does not meet any of the four criteria for classifying a lease as a capital lease. b. Borman records the following liability amounts at inception: For Lease J, Borman records as a liability at the inception of the lease an amount equal to the present value at the beginning of the lease term of minimum lease payments during the lease term, excluding that
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This note was uploaded on 02/16/2012 for the course FINA 470 taught by Professor Austin during the Fall '11 term at South Carolina.

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Problem 3-2 Extra lease problem for review - Problem 3-3(30...

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