PWEDE BANG I-LEASE ANG UTAK CORP. leases a piece of land from another company. The lease does not transfer ownership of the land to the lessee but the present value of the future lease payments is equal to a significant portion of the fair market value of the land. It also leases a piece of equipment from the same company. The lease for this equipment does not contain a purchase option but the term of the
PWEDE BANG I-LEASE ANG UTAK CORP. leases a piece of land from another company. The lease does not transfer ownership of the land to the lessee but the present value of the future lease payments is equal to a significant portion of the fair market value of the land. It also leases a piece of equipment from the same company. The lease for this equipment does not contain a purchase option but the term of the
Chapter1: Financial Statements And Business Decisions
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PWEDE BANG I-LEASE ANG UTAK CORP. leases a piece of land from another company. The lease does not transfer ownership of the land to the lessee but the present value of the future lease payments is equal to a significant portion of the fair market value of the land. It also leases a piece of equipment from the same company. The lease for this equipment does not contain a purchase option but the term of the lease is equal to 15 of the 20-year economic life of such an underlying asset which, under the new standard, comprises the majority of the equipment's useful life. How should the lessor of these assets classify these leases?
a. Lease of Land - Finance Lease; Lease of Equipment - Operating Lease
b. Lease of Land - Finance Lease; Lease of Equipment - Finance Lease
c. Lease of Land - Operating Lease; Lease of Equipment - Finance Lease
d. Lease of Land - Operating Lease; Lease of Equipment - Operating Lease
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