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Technoid Inc. sells computer systems. Technoid leases computers to Lone Star Company on January 1, 2021. The manufacturing cost of the computers was $12 million.
Technoid Inc. sells computer systems. Technoid leases computers to Lone Star Company on January 1, 2021. The manufacturing cost of the computers was $12 million. This noncancelable lease had the following terms: Lease payments: $2,466,754 semiannually; first payment at January 1, 2021; remaining payments at June 30 and December 31 each year through June 30, 2025. Lease term: five years (10 semiannual payments). No residual value; no purchase option. Economic life of equipment: five years. Implicit interest rate and lessee's incremental borrowing rate: 5% semiannually. Fair value of the computers at January 1, 2021: $20 million. Lone Star Company would account for this as: Multiple Choice A finance lease. O O A sales type lease without selling profit. A sales type lease with selling profit. O An operating lease
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