Specifically lease j should be classified as a capital

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Unformatted text preview: 070.00 Total Expenses $11,180.40 10,635.95 10,047.95 9,412.90 8,722.80 $50,000.00 e. The student should note that reported expenses exceed the cash flows in earlier years, while the reverse occurs in later years. Problem 2 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...
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