Question
Out2B Company signed an 4-year lease agreement for new vehicle with LeaseCo. The leasing contract amount to $64.000. At the end of the lease term,
Out2B Company signed an 4-year lease agreement for new vehicle with LeaseCo. The leasing contract amount to $64.000. At the end of the lease term, the vehicle will revert back to the LeaseCo. The vehicle has a useful life of 5 years and has no salvage value. When signing the lease agreement, the equipment has a fair value of $67,500. An interest rate of 5% and straight-line depreciation are used.
Is this a capital or operating lease and why?
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Intermediate Accounting 2014 FASB Update
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield
15th edition
978-1118938782, 111893878X, 978-1118985311, 1118985311, 978-1118562185, 1118562186, 978-1118147290
