On January 1, 2020, Dionne Ltd

Multiple Choice

On January 1, 2020, Dionne Ltd. signs a 10-year non-cancellable lease agreement to lease a storage building from Seline Inc. Seline is in the business of leasing/selling property. Collectibility of the lease payments is reasonably assured and no additional costs are to be incurred by the lessor (other than executory costs) . Both the lessor and the lessee are private corporations adhering to ASPE. The following information is available regarding this lease agreement:
1) The agreement requires equal payments at the end of each year.
2) At January 1, 2020, the fair value of the building is $ 900,000 and Seline's book value is $ 750,000.
3) The building has an estimated economic life of 10 years, with no residual value. Dionne uses straight-line depreciation for all its depreciable assets.
4) At the termination of the lease, title to the building will transfer to the lessee.
5) Dionne's incremental borrowing rate is 11%. Seline Inc. set the annual rental to ensure a 10% rate of return. The lessor's implicit rate is known to Dionne.
6) The yearly lease payment includes $ 3,000 executory costs related to taxes on the property.
From the lessee's viewpoint, what type of lease is this?

A) sales-type lease
B) sale-leaseback
C) capital lease
D) operating lease