Description
Compare and contrast a capital lease and an operating lease, and recommend to management what type of lease would be beneficial since the equipment will become obsolete in eight (8) years.
Explanation & Answer
A capital lease is a lease in which the lessor only finances the lease, and all other rights of ownership transfer to the lessee, resulting in the recording of the asset as the lessee's property in its general ledger. The lessee can only record the interest portion of a capital lease payment as expense, as opposed to the amount of the entire lease payment in the case of a normal lease.
An operating lease is a lease whose term is short compared to the useful life of the asset or piece of equipment (an airliner, a ship, etc.) being leased. An operating lease is commonly used to acquire equipment on a relatively short-term basis. operating lease is therefore highly recommended
Review
Review
24/7 Homework Help
Stuck on a homework question? Our verified tutors can answer all questions, from basic math to advanced rocket science!
Similar Content
Related Tags
The Scarlet Letter
by Nathaniel Hawthorne
12 Rules for Life
by Jordan Peterson
Robinson Crusoe
by Daniel Defoe
Into the Wild
by Jon Krakauer
Les Miserables
by Victor Hugo
The Kite Runner
by Khaled Hosseini
Crippled America
by Donald J Trump
The Jade Peony
by Wayson Choy
Sharp Objects
by Gillian Flynn