On December 31, 2010, Reagan, Inc., signed a lease for some equipment having a 9

Question

On December 31, 2010, Reagan, Inc., signed a lease for some equipment having a 9-year useful life with Silver Leasing Co. The lease payments are made by Reagan annually, beginning at signing date. Title does not transfer to the lessee, so the equipment will be returned to the lessor on December 31, 2016. There's no bargain purchase option, and Reagan guarantees a residual value to the lessor on termination of the lease.

Reagan’s lease amortization schedule appears below:

In this situation, Reagan is the

A. lessor in a capital lease.

B. lessor in a sales-type lease.

C. lessee in a sales-type lease.

D. lessee in a capital lease.

Explanation / Answer

answer is D. lessee in a capital lease.

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