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On January 1, Lessor Company leases equipment to Lessee Company. The lease term is 8 years; the economic life of the asset is 12 years.

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On January 1, Lessor Company leases equipment to Lessee Company. The lease term is 8 years; the economic life of the asset is 12 years. The cost of the equipment is $36,000; its fair value is $61,000. Lessor's implicit rate is 7%; Lessee's incremental borrowing rate is 7%. Lease payments of $9000 are due at the beginning of each year (PV $57,510). At the end of the lease term, the asset is expected to have a residual value of $6000 (PV $3492), none of which is guaranteed by Lessee. a. This is a finance lease for Lessee with a liability of $61,000. b. This is an operating lease for Lessee with a liability of $61,000. C. This is a finance lease for Lessee with a liability of $61,000 - the present value of the $6000. d. This is an operating lease for Lessee with a liability of $61,000 - the present value of the $6000

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