Determine whether each of the leases should be classified

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Reference no: EM13173223

Henri Retail Stores is negotiating three leases for store locations. Henri's incremental borrowing rate is 12 percent. Each store will have an economic useful life of 30 years. Lease payments will be made at the end of each year. Based on the data below, properly classify each of the leases as an operating lease or a capital lease. The purchase price for each property is listed as an alternative to leasing.

	Location Lease Term	Lease Payment	Purchase Price
Location A	26 years	$1,500,000	$12,000,000
Location B	20 years	1,300,000	10,000,000
Location C	20 years	1,400,000	15,000,000

Determine whether each of the leases should be classified by Henri as an operating lease or a capital lease. Show computations and reasons to support your answers.

(1)	Location A
(2)	Location B
(3)	Location C

Reference no: EM13173223

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