ACCOUNTING
Case 13-5 Lease Classifications
Doherty Company leased equipment from Lambert Company. The classification of the lease makes a difference in the amounts reflected on the balance sheet and income statement of both Doherty and Lambert.
Required:
a. What criteria must be met by the lease in order that Doherty Company classify it as a capital lease?
b. What criteria must be met by the lease meet in order that Lambert Company classify it as a sales-type or direct financing lease?
c. Contrast a sales-type lease with a direct financing lease.
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