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Marty McDonough is considering a 12-year (144-month) lease for manufacturing equipment with a life of 18 years.The minimum payments on the lease are $3,000 per
- Marty McDonough is considering a 12-year (144-month) lease for manufacturing equipment with a life of 18 years.The minimum payments on the lease are $3,000 per month (or $36,000 per year); they are to be discounted back to the present at an 7% annual discount rate.The estimated fair value of the equipment is $350,000.Find (1) whether the lease is to be recorded as a capital lease or an operating lease; (2) show your computations and explain your reasoning.
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