this problem, the applicable present-value and future-value tables are attached.

Question

this problem, the applicable present-value and future-value tables are attached. fective March 1, 2015, The Rosenfeld Company will acquire pieces of equipment from the anning Machine Corporation. The following financing alternatives have been offered to osenfeld by Danning: 1. Pay $1,000,000 in cash immediately 2. Pay $420,000 immediately, when the remainder in 10 installments of $80,000, and the first installment due on March 1, 2016. 3. Make 10 annual installments of $135,000, with the first payment due immediately Make one lump-sum payment of $1,500,000 five years from March 1, 2015 rnational LIBOR rate is 6%. Danning's incremental borrowing rate is 7% The current inte and its implicit interest rate is 8%. Rosenfeld can borrow funds currently at 9%. a schedule showing the various alternatives available to Rosenfeld. Indicate on th Pre pare schedule whether alternative 3 above would be an operating lease or a capital lease

Explanation / Answer

3 above would be capital lease and not operating lease,  An operating lease is treated like renting -- payments are considered operational expenses and the asset being leased stays off the balance sheet. while on the other hand, a capital lease is more like a loan; the asset is treated as being owned by the lessee so it stays on the balance sheet.   

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