Intermediate accouting. Author: Spiceland, J. David

I know we had discussed that theyre supposed to be worth $24,000 when our purchase option becomes exercisable, Ferris insisted. Thats why we agreed to the lease terms. But, Jenkins, you know how fast computers become dated. We can make a good case that theyll be worth only $10,000 in three years. The computers to which Ferris referred were acquired by lease. The lease meets none of the criteria for classification as a capital lease except that it contains an apparent bargain purchase option. Under the lease option, the computers can be purchased for $10,000 after three years. We could avoid running up our debt that way, Jenkins agreed.

How could debt be avoided?

Do you perceive an ethical problem?