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Each of the four independent situations below describes a lease requiring annual lease payments of $30,000. Situation 1 2 3 4 Lease term (years) 4
Each of the four independent situations below describes a lease requiring annual lease payments of $30,000.
| Situation | ||||
| 1 | 2 | 3 | 4 | |
| Lease term (years) | 4 | 4 | 4 | 4 |
| Assets useful life (years) | 6 | 6 | 5 | 6 |
| Assets fair value | $132,000 | $123,000 | $129,000 | $117,000 |
| Bargain purchase option? | No | No | Yes | No |
| Annual lease payments | Beg. of yr. | Beg. of yr. | End of yr. | End of yr. |
| Lessors implicit rate (known by lessee) | 5% | 5% | 7% | 6% |
| Lessees incremental borrowing rate | 5% | 5% | 5% | 5%
|
For each situation, determine the appropriate lease classification by the lessee and indicate why
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Social Responsibility Audit A Management Tool For Survival
Authors: John W Humble
1st Edition
0900853522, 978-0900853524
