On January 1, 2020 Company A leases a machine from B Corp through a contract that requires 5 payments of $10,000 every January 1, beginning on that day. The present value of the payments discounted at 10% is 42,000. The useful life of the asset is 10 years and the market value is $45,000. How should you classify the A Corp lease? A) Type of sale B) None of the above C) Operational D) Financial

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 10MC: On August 1, 2019, Kern Company leased a machine to Day Company for a 6-year period requiring...
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On January 1, 2020 Company A leases a machine from B Corp through a contract that requires 5 payments of $10,000 every January 1, beginning on that day. The present value of the payments discounted at 10% is 42,000. The useful life of the asset is 10 years and the market value is $45,000. How should you classify the A Corp lease?

A) Type of sale

B) None of the above

C) Operational

D) Financial

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