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ABC Co leased non-specialized equipment to XYZ Co for an eight-year period, at which time possession of the equipment will revert to ABC Co. There

ABC Co leased non-specialized equipment to XYZ Co for an eight-year period, at which time possession of the equipment will revert to ABC Co. There is no option for XYZ to purchase the equipment at the end of the lease term. The equipment has an expected useful life of 12 years. The normal selling price of the equipment is $22.4M and the present value of the lease payments between ABC and XYZ is $20.6M. How should XYZ classify this lease?

Question 13 options:

Operating Lease

Short term lease

Finance Lease

None of the above are correct.

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