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  3. a company leases the following asset: fair value o

A company leases the following asset: Fair value of $200,000. Useful life of 5 years...

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Accounting

A company leases the following asset:

Fair value of $200,000.

Useful life of 5 years with no salvage value.

Lease term is 4 years. It is noncancellable.

Annual lease payment is $30,000 and the lease rate is 11%.

The companys overall borrowing rate is 9.5%.

The firm can purchase the equipment at the end of the lease period for $45,000.

What type of lease is this?

a.

operating
b.

capital

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