1. Which of the following is a criterion for classifying a lease for a lessee as a finance lease?

1. The lease term is for a major part of the assets economic life.
2. The lease transfers ownership of the asset to the lessee at the end of the lease term.
3. The present value of the lease payments equals or exceeds substantially the assets fair value.
4. All of the above.

1. At the inception of a finance lease, the guaranteed residual value should be

1. Included at present value as part of the lease payments
2. Included at undiscounted value as part of the lease payments.
3. Ignored by the lessee in computing the lease payments
4. Included at present value as part of the lease payments only to the extent that it exceeds the expected residual value