A capital lease is economically similar to purchasing the asset.

Question

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A capital lease is a lease agreement that is economically similar to purchasing the asset, as the lessee (the one leasing) has the benefits and risks of ownership during the lease term. At the end of the lease term, the lessee typically has the option to purchase the asset for a designated amount. This is in contrast to an operating lease, where the lessor (the one leasing) retains the benefits and risks of ownership and typically has the obligation to maintain and repair the asset.

A Capital Lease Is Economically Similar to Purchasing the Asset