Question
Classifying Leases Hello Please calculate the Year lease term is, the Pv of lease payment the Analysis part as well as the % of the
Classifying Leases Hello Please calculate the Year lease term is, the Pv of lease payment the Analysis part as well as the % of the asset's useful life please and thank you
Tropical Products Inc. is in the process of negotiating a lease of equipment with a fair value of $50,000, and it must determine the proper lease classification. The following table describes four scenarios under negotiation.
Option 1Option 2Option 3Option 4Ownership transferNoNoNoNoPurchase optionNoNoNo$10,000 purchase option, considered a discounted price.Length of lease term, in years4343Economic life of equipment, in years5555No alternative use of equipment at lease endNoNoNoNoAnnual lease payment$11,000$11,000$11,000$11,000Guaranteed residual valueNoNo$15,000NoImplicit rate of leaseUnknown to lesseeUnknown to lessee8.4%Unknown to lesseeIncremental borrowing rate of lessee8%8%8%8%Payment typeBeginning of periodBeginning of periodBeginning of periodEnd of period
Required For each of the four options, determine whether the lessee would classify the lease as operating or nance.
Option OneLease Classification CriteriaCriterion Met?Analysis1.Ownership transferAnswerYesNo2.Purchase optionAnswerYesNo3.Lease term lengthAnswerYesNoAnswer
year lease term isof the assets useful life ofAnswer
years.4.Present value of lease paymentsAnswerYesNoPV of lease payments ofAnswer
isof the asset's fair value ofAnswer
.5.No alternative useAnswerYesNoHello Please calculate the Year lease term is, the Pv of lease payment the Analysis part as well as the % of the asset's useful life please and thank you
Lease type for Option One: AnswerFinance leaseOperating lease
Option TwoLease Classification CriteriaCriterion Met?Analysis1.Ownership transferAnswerYesNo2.Purchase optionAnswerYesNo3.Lease term lengthAnswerYesNoAnswer
year lease term isof the assets useful life ofAnswer
years.4.Present value of lease paymentsAnswerYesNoPV of lease payments ofAnswer
isof the asset's fair value ofAnswer
.5.No alternative useAnswerYesNo
Lease type for Option Two: AnswerFinance leaseOperating lease
Option ThreeLease Classification CriteriaCriterion Met?Analysis1.Ownership transferAnswerYesNo2.Purchase optionAnswerYesNo3.Lease term lengthAnswerYesNoAnswer
year lease term isof the assets useful life ofAnswer
years.4.Present value of lease paymentsAnswerYesNoPV of lease payments ofAnswer
isof the asset's fair value ofAnswer
.5.No alternative useAnswerYesNo
Lease type for Option Three: AnswerFinance leaseOperating lease
Option FourLease Classification CriteriaCriterion Met?Analysis1.Ownership transferAnswerYesNo2.Purchase optionAnswerYesNo3.Lease term lengthAnswerYesNoAnswer
year lease term isof the assets useful life ofAnswer
years.4.Present value of lease paymentsAnswerYesNoPV of lease payments ofAnswer
isof the asset's fair value ofAnswer
.5.No alternative useAnswerYesNoStep by Step Solution
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