Minnetonka Company leases an asset. Information regarding the lease (Minnetonka is the lessee):• Fair value of the asset: $400,000.• Useful life of the asset: 6 years with no salvage value.Lease term is 5 years.• Annual lease payments are $60,000Implicit interest rate: 11%.• Minnetonka can purchase the asset at the end of the lease period for $50,000.How should the lessee classify this lease?A) Operating.B) Finance.C) Short term.D) Long term.O BO O OO

Introduction:- Leasing is an agreement between parties in which the right to use the asset is…

Answered: • Fair value of the asset: $400,000. •…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Concept explainers

Question

Minnetonka Company leases an asset. Information regarding the lease (Minnetonka is the lessee):
• Fair value of the asset: $400,000.
• Useful life of the asset: 6 years with no salvage value.
Lease term is 5 years.
• Annual lease payments are $60,000
Implicit interest rate: 11%.
• Minnetonka can purchase the asset at the end of the lease period for $50,000.
How should the lessee classify this lease?
A) Operating.
B) Finance.
C) Short term.
D) Long term.
O B
O O OO

Expert Solution

Step 1

Introduction:-

Leasing is an agreement between parties in which the right to use the asset is transferred to another person.
Two persons involved (Lessor and lessee)
Only right to use an asset is transferred by the lessor to lessee without transferring the ownership of the asset.

Trending now

This is a popular solution!

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions