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1)The lessor retains title to the asset, and the lease term is 3 years on an asset that has a 10-year useful life
1)The lessor retains title to the asset, and the lease term is 3 years on an asset that has a 10-year 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 asset’s market value, and the lease term is 90% of the leased asset’s
Expert Solution
1. The lessor retains tittle to the assest,and the lease term is 3 year on an assest that has a 10 year useful life,this indicates that more than 75% of the assest's useful life.hence it is a capital lease.
2. The title is transfered to the lessee,this is a capital lease.The lessee can purchase the assest for $1 at the end of the lease period,this is bargain purchase option .the lease term is five years,out of its useful life of six year.this is more than 75% hence it comes under capital lease.
3. The present value of the lesse payment is 95%,this is more than 90% of the leased assest marlet value and hence it can be a capital lease.
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