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Recording Lease as Capital Lease

Snappy Corporation enters into a lease agreement with Long Leasing. Long requires that the lease qualify as a sale. Snappy can fill this requirement by either guaranteeing the residual value itself or having a third party guarantee the residual value. Self-guarantee of the residual value will result in a capital lease to Snappy. The third-party guarantee will allow Snappy to report the lease as an operating lease (off-balance sheet financing).

Argue for recording the lease as a capital lease.

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Snappy Corporation enters into a lease agreement with Long Leasing. Long requires that the lease qualify as a sale. Snappy can fill this requirement by either guaranteeing the residual value itself or having a third party guarantee the residual value. Self-guarantee of the residual value will result in a capital lease to Snappy. The third-party guarantee will allow Snappy to report the lease as an operating lease (off-balance sheet financing).

Argue for recording the lease as a capital lease. At least 50 words.

Snappy Corporation enters into a lease agreement with ...

Solution Summary

The solution discusses recording lease as capital lease.

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