On February 1, 2013, Pearson Corporation became the lessee of equipment under a five-year, noncancelable lease. The estimated economic life of the equipment is eight years. The fair value of the equipment was $680,000. The lease does not meet the definition of a capital lease in terms of a bargain purchase option, transfer of title, or the lease term. However, Pearson must classify this as a capital lease if the present value of the minimum lease payments is at least
Solution
The present value of the minimum lease payment is $544,000
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On February 1- 2013- Pearson Corporation became the lessee of equipmen (1).docx
1. On February 1, 2013, Pearson Corporation became the lessee of equipment under a five-year,
noncancelable lease. The estimated economic life of the equipment is eight years. The fair value
of the equipment was $680,000. The lease does not meet the definition of a capital lease in terms
of a bargain purchase option, transfer of title, or the lease term. However, Pearson must classify
this as a capital lease if the present value of the minimum lease payments is at least
On February 1, 2013, Pearson Corporation became the lessee of equipment under a five-year,
noncancelable lease. The estimated economic life of the equipment is eight years. The fair value
of the equipment was $680,000. The lease does not meet the definition of a capital lease in terms
of a bargain purchase option, transfer of title, or the lease term. However, Pearson must classify
this as a capital lease if the present value of the minimum lease payments is at least
Solution
The present value of the minimum lease payment is $544,000