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Should the lease be recorded as capital or operating

Problem:

The Deluxe Corporation has just signed a 120-month lease on an asset with a 15-year life. The minimum lease payment s are $2,000 per month ($24,000 per year) and are to be discounted back to the present at an 7 percent annual discount rate. The estimated fair value of the property is $175,000. Should the lease be recorded as a capital lease or an operating lease? Why?

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Finance Basics: Should the lease be recorded as capital or operating

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Finance Basics: Should the lease be recorded as capital or operating

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