Valese Inc. leased standard equipment to Linus Corporation with a lease period of 8 years. At the end of the lease Valese is to have possession of the equipment. Valese paid $16,000 for the equipment. The useful life of the equipment is 12 years. The normal sale price of the equipment is $22,500. The present value of the lease payments for the lessor and lessee is $20,500. The first payment was made the day the lease was signed. What are the five criterial for classification as a finance lease? Can Linus classify this as a finance lease? If yes, which criteria it met for a finance lease?
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