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	Situation

	1	2	3	4
Lease term (years)	4	4	4	4
Asset's useful life (years)	6	5	6	6
Asset's fair value	$44,000	$43,000	$41,000	$39,000
Bargain purchase option?	No	Yes	No	No
Annual lease payments	Beg. of yr.	End of yr.	Beg. of yr.	End of yr.
Lessor's implicit rate (known by lessee)	5%	6%	5%	6%
Lessee's incremental borrowing rate	5%	5%	5%	5%

Each of the four independent situations above describes a lease requiring annual lease payments of $10,000. For each situation, determine the appropriate lease classification by the lessee.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9797367

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