Chapter 21, Problem 5Q

To determine

Operational lease method: A process of using the asset for a rental payable in installments or in bulk without transfer of ownership of the asset is termed operation lease. The lessee has to return back the asset once the tenure of lease is over. The expenses like insurance, maintenance and repair expenses are borne by the lessor.

Capital lease method: A process of using the asset for a rental payable in installments along with interest and gets the ownership of the title at the end of the lease contract is termed capital lease. In this, the owner of the asset or the lessor need not bear expenses like depreciation, insurance, maintenance and repair. All these expenses need to be paid by the lessee. In a nutshell, capital lease is like an installment sale.

To determine the difference between minimum rental and minimum lease payment.