Question

Minnetonka Company leases an asset. Information regarding the lease:Fair value of the asset: $400,000. Useful life of the asset: 6 years with no salvage value. Lease term is 5 years. Annual lease payments are $60,000 Implicit interest rate: 11%. Minnetonka can purchase the asset at the end of the lease period for $50,000. What type of lease is this?A) Operating.B) Finance.C) Short term.D) Long term.

Answer 1

Finance lease

Step-by-step explanation:

Finance lease is type of lease that is concerned on the owning a property. in other word it is finance method that is entitled to finance assets and owning authority has to pay hiring amount for the assets.

It is totally different from the operating lease. it can be described as finance lease is related to owning the property and operating is related to the renting the property.