Answer Happy

In each of the following separate cases, indicate whether the company has entered into a finance lease or an operating lease. 1. The lessee can purchase the leased asset for a minimal $5 payment at the end of the lease and the lease term is for a major part of the asset's remaining economic life. 2. The leased asset is highly customized for the lessee's operations and would be of no use to any other business. 3. The lessee does not have ownership of the asset and the present value of lease payments equals 12% of the asset's fair value. 1. 2. 3. The lessee can purchase the leased asset for a minimal $5 payment at the end of the lease and the lease term is for a major part of the asset's remaining economic life. The leased asset is highly customized for the lessee's operations and would be of no use to any other business. The lessee does not have ownership of the asset and the present value of lease payments equals 12% of the asset's fair value.