Response to the following problem:
Use the following information to decide whether this equipment lease qualifies as an operating, sales-type, or direct financing lease to a lessor.
(a) There is no transfer of ownership at the end of the lease term.
There is no bargain purchase option.
The lease term is 72% of the economic life of the leased property.
The present value of minimum lease payments is 100% of the fair value of the leased property to the lessor.
The cost of the leased property is less than the fair value.
The collectability of the minimum lease payments is reasonably assured.
No important uncertainties surround the amount of unreimbursable costs yet to be incurred by the lessor under the lease.
(b) Same as (a), except that the cost of the leased property equals its fair value.
(c) Same as (a), except that the present value of minimum lease payments is only 50% of the fair value of the leased asset.
The collectability of the minimum lease payments is not predictable.
There are important uncertainties surrounding the amount of unreimbursable costs yet to be incurred by the lessor.