Alfredo has a non-cancelable,five year lease on an industrial-grade sewing machine for stitching upholstery.For accounting purposes,this is considered to be a capital lease.The life of the sewing machine is five years.Alfredo must pay all taxes and insurances related to this lease.Which type of lease does Alfredo have on this sewing machine?
A)open
B)straight
C)operating
D)financial
E)tax-oriented

Question

Quizplus · Accepted Answer

The lease described in the scenario is a capital lease, which is a type of financial lease. This is because Alfredo is responsible for all taxes and insurances related to the sewing machine, which indicates that he has assumed the risks and rewards of ownership. Additionally, the lease term matches the useful life of the sewing machine.

Alfredo Has a Non-Cancelable,five Year Lease on an Industrial-Grade Sewing