Miller Company leases office equipment from Swanson Company. The fair value of the equipment exceeds Swanson's cost. Collectability of the lease payments is reasonably assured; there are no material uncertainties surrounding the lease. Additionally, there is a bargain purchase option. Swanson will account for the lease as a(n) ________.

Question

Quizplus · Accepted Answer

Swanson will account for the lease as a sales-type lease because the fair value of the equipment exceeds Swanson's cost, and there is a bargain purchase option, indicating that the lease transfers ownership-like benefits and risks to the lessee.

Miller Company Leases Office Equipment from Swanson Company