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  3. a comparison between operating lease and capital l

A comparison between Operating Lease and Capital Lease Now assume that company ABC leases an...

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A comparison between Operating Lease and Capital Lease Now assume that company ABC leases an equipment for 5 years instead. Other information mostly remains the same (except for highlighted texts) "Leased assets have an expected life of 5 years. "Depreciation is straight line. "Annual lease payment is $7,505. "interest rate is 8%. "the ownership of the property goes back to the lessor at the end of the lease term "Lease payments are made at beginning of each year, "the present value of the lease payment is 10,000 (Present value of 2,505 ordinary annuity for 5 years at 8%) "Fair value of the equipment is 10,000. The lease does not contain a bargain purchase option 3a. Determining type of lease (based on the post 2019 rule) 40 lease transfers ownership of property to lessee by end of the lease term 5 (10) lease contains an option to purchase the property at a bargain price 6 (1) tease term constitute a majority part of estimated economic life of the property 7 (1) present value of rentals and other minimum lease payments at beginning of lease term is equal to or more than the fair value of leased property 18 Which of the above criteria is met

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