Answer Happy

LesSea Corp leases a tractor from Lessoar with a five-year non-cancelable lease on January 1, 2018 under the following terms: 1. Five payments of $26,379.74 (a 9% implicit rate, known to LesSea) due at the end of each year 2. The payments were calculated based on the fair value (which is also the book value for equity) of the tractor 3. The lease is non-renewable and the tractor reverts to LesSoar at the end of the lease term 4. The tractor has a six-year economic life 5. LesSea has an excellent credit rating 6. LesSoar offers no warranty on the tractor other than the manufacturer's two- year warranty that is handled directly with the manufacturer. Both LesSea and LesSoar use ASC 840 gudance for lease accounting. For LesSea and LesSoar, respectively, the lease will be treated as a LesSea treats as operating lease and LesSoar treats it as an operating lease LesSea treats it as a direct operating lease and Lessoar treats it as an ordinary captital lease LesSea treats it as a captial lease and LesSoar treats it as a direct financing capital lease LesSea treats it as an operating lease and LesSoar treats it as a sales-type capital lease