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Posted by: Homeworkhelp
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Posted On: 2011-03-07 07:07:52
 
Question

E 14-16C Indicate whether the company in each separate case 1 through 3 has entered into an operating lease or a capital lease.

 

Exercise 14-16C Identifying capital and operating leases

 

Fundamental Accounting Principles, 7th Ed Larson Wild Chiappetta

 

ANSWER KEY Exercise 14-16C Indicate whether the company in each separate case 1 through 3 has entered into an operating lease

 

Exercise 14-16C  Indicate whether the company in each separate case 1 through 3 has entered into an operating lease or a capital lease.

1. The lessor retains title to the asset, and the lease term is three years on an asset that has a fiveyear

useful life.

2. The title is transferred to the lessee, the lessee can purchase the asset for $1 at the end of the lease, and the lease term is five years. The leased asset has an expected useful life of six years.

3. The present value of the lease payments is 95% of the leased assetís market value, and the lease term is 70% of the leased assetís useful life.

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