Specifically lease j should be classified as a capital

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

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...
View Full Document

Ask a homework question - tutors are online