Owens Company leased equipment for 4 years at $50,000 a year with an option to renew the lease for 6 years at $2,000 per month or to purchase the equipment for $25,000 (considerably less than the expected fair value) after the initial lease term of 4 years. Why would this lease qualify as a finance lease?

Owens Company leased equipment for 4 years at $50,000 a year with an option to renew the lease for 6 years at $2,000 per month or to purchase the equipment for $25,000 (considerably less than the expected fair value) after the initial lease term of 4 years. Why would this lease qualify as a finance lease?

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter20: Accounting For Leases

Section: Chapter Questions

Problem 10GI: Owens Company leased equipment for 4 years at 50,000 a year with an option to renew the lease for 6...

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