On January 1, 2012, Porter Corporation Signed a Five-Year Non-Cancelable $8 \%$

On January 1, 2012, Porter Corporation signed a five-year non-cancelable lease for certain machinery.The terms of the lease called for:
1) Price to make annual payments of \$60,000 at the end of each year (starting an Dec. 31, 2012) Far Ene years. Parter must return the equigment to the lessor end of this periad.
2) The machinery has an estimated useful life of o years and no exgected salvage value.
3) Parter uses the straight-line method af depreciation far all of its fixed assets.
4) Parter's incremental barrowing rate is $8 \%$
5) The fair value of the asset at January 1,2012 is $\$ 27,000$ .
-What accounting method should Porter use to account for the equipment lease?

A) Operating Lease method
B) Capital Lease method
C) Equipment Lease method
D) Lessee Accounting method

Correct Answer:

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