Each of the independent situations below describes a lease requiring annual lease payments of $10,000. For each situation, determine the appropriate lease classification by the lessee and indicate why.
Lease term = 4
Asset useful life = 6
Asset's FV = $44,000
Bargain Purchase = No
Annual Lease Payment = Begining
Lessor's implicit rate = 5%
Lessee's incremental borrow rate = 5%
Lease term = 4
Asset useful life = 5
Asset's FV = $43,000
Bargain Purchase = Yes
Annual Lease Payment = End
Lessor's implicit rate = 6%
Lessee's incremental borrow rate = 5%
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