Decide Whether Each of the Following Situations Involving Lease Agreements

question 152

Essay

Decide whether each of the following situations involving lease agreements should be recorded as an operating lease or as a capital lease,AND justify why.
a_The lease term is for 10 years,the estimated remaining life of the leased asset is 12 years.The leased asset reverts back to the lessor at the end of the lease term.
b_The lease transfers ownership of the leased asset to the lessee at the end of the lease term.The lease term is for eight years,the estimated remaining life of the leased asset is 10 years.
c_The lease term is for five years,the estimated remaining life of the leased asset is nine years.The lease agreement contains an option for the lessee to purchase the leased asset at the end of the lease term at a price substantially below its fair market value.
d_The lease term is for six years,the estimated remaining life of the leased asset is fifteen years.The lease agreement doesn't contain an option for the lessee to purchase the leased asset at well below the estimated current market value at the end of the lease term.The leased asset reverts back to the lessor at the end of the lease term.

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Definitions:

Minerals

Inorganic substances required by the body in small amounts for a variety of functions, including building strong bones and teeth, and regulating metabolism.

Buffers

Substances that minimize changes in pH by absorbing or releasing hydrogen ions in a solution.

Enzymes

Biological catalysts that speed up chemical reactions in living organisms by lowering the activation energy, involved in processes such as digestion and metabolism.

Glycolysis

A metabolic process that breaks down glucose to form pyruvate, releasing energy and producing ATP.