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Problem:

The Deluxe Corporation has just signed a 120-month lease on an assest with a 15-year life. The minimum lease payments are 2,000 per month (24,000 per year) and are to be discounted back to the present at a 9 percent annual discount rate. The estimated fair value of the property is 200,000. Use Appendix D.

Required:

Question 1: Calculate the lease period as a percentage to the estimated life of the leased property.

Question 2: Calculate the present value of lease payments as a percentage to the fair value of the property.

Question 3: Should the lease be recorded as a capital lease or an operating lease? it's either an operating lease or capital lease.

Note: Provide support for rationale.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91171279

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