Chapter 20, Problem 8RE

Use the following information to decide whether this equipment lease qualifies as an operating, sales-type, or direct financing lease to a lessor.

1. a. •    There is no transfer of ownership at the end of the lease term.
   • There is no bargain purchase option.
   • The lease term is 60% of the economic life of the leased property.
   • The present value of lease payments, including a residual value guaranteed by the lessee, is 100% of the fair value of the leased property to the lessor.
   • The collectability of the lease payments is reasonably assured.
   • The leased asset was not of a specialized nature.
2. b. Same as (a), except that the residual value is guaranteed by a third party, not the lessee. The present value of the residual value guarantee is 15% of the fair value of the leased property.
   1. c. Same as (a), except that:
      • the present value of the lease payments, including a residual value guaranteed by the lessee, is only 50% of the fair value of the leased asset.
      • The collectability of the minimum lease payments is not predictable.