Copy Corporation entered into a lease agreement for 20 photocopy machines for its corporate headquarters. The lease agreement qualifies as an operating lease in all ways except that there is a bargain purchase option. After the four-year lease term, the corporation can purchase each copier for $1,500, when the anticipated market value of each machine will be $3,800.

Glenn Beckirtt, one of the chief accountants, thinks the financial statements must recognize the lease agreement as a finance (capital) lease because of the bargain purchase clause. One of the head accountants, Tara Kobba, disagrees: Although I dont know much about the copiers themselves, there is a way to avoid recording the lease liability. She argues that the corporation might claim that copier technology advances rapidly and that by the end of the lease term four years in the future the machines will most likely not be worth the $1,500 bargain price.

Required: Following the case format, please address 3 primary issues. Approximately 2 pages total.