Lease Illustration #3
Illustration #3 Illustrates a capital lease, DF, BPO
Information: Three year lease, signed 1/1/x1.
- Estimated useful life of the asset is four years.
- The present value of the minimum lease payments (MLP) equals the cost of the asset, $90,000.
- There is no transfer of ownership at the end of the lease; there is an option to buy the asset at the end of the lease for $5,000. Estimated market value at that time: $9,000.
- There are no significant uncertainties surrounding this lease regarding collectibility or future performance.