On January 1, 2021, DIXIE KONG Corp. leased six computers for use of Accountancy Department. The lease period is five years, and the estimated economic life of the leased property is six years. The lease does not contain automatic title transfer and purchase option. Annal lease payments are payable in advance every January 1 in the amount of P90,000. The incremental borrowing rate for DIXIE KONG Corp. is 12% and the implicit rate known to DIXIE KONG is 10%. The company uses straight-line depreciation for this type of asset.

Three different lease transactions are presented below for Carla Vista Enterprises. Assume that all lease transactions start on January 1, 2021. Carla Vista does not receive title to the properties, either during the lease term or at the end of it. The yearly rental for each of the leases is paid on January 1 starting on January 1, 2021. Carla Vista Enterprises prepares its financial statements using ASPE. Manufacturing Equipment Office Equipment Vehicles Lease term 5 years 6 years 3 years Estimated economic life 15 years 7 years 6 years Yearly rental payment $15,370 $15,348 $3,928 Fair market value of leased asset $99,050 $89,150 $16,910 Present value of lease rental payments $58,910 $69,023 $10,340

Explain the basis for each of the criteria used to classify leases

Define Short-Term Leases.

Define the term Lease Financing?