Calvada Productions signs a lease agreement with Lessor, Inc. According to the terms of the lease,
ownership of the leased asset will be transferred to Calvada at the end of the lease term for
$5,000, which is estimated to be the fair-market value of the asset at that time. This lease should be
classiﬁed as an operating lease for accounting purposes.

Question

Quizplus · Accepted Answer

Based on the information given, this should be classified as a finance lease rather than an operating lease, as ownership of the asset is intended to transfer to the lessee at the end of the lease term for a predetermined amount.

Calvada Productions Signs a Lease Agreement with Lessor, Inc