Asked by
LaQwana Smith
on Nov 13, 2024
Verified
Which of the following is not a condition which would require the recording of a lease contract as a capital lease?
A) The lease transfers ownership of the property to the lessee.
B) The lease contains a bargain purchase option.
C) The lease term is less than 75% of the economic life of the leased property.
D) The present value of the lease payments equals or exceeds 90% of the fair value of the leased property.
Capital Lease
A capital lease is a lease agreement that transfers substantially all the risks and benefits of ownership from the lessor to the lessee.
Bargain Purchase Option
A provision in a lease agreement that allows the lessee to purchase the leased asset at a price significantly below its fair market value.
Economic Life
The estimated period over which an asset is expected to be useful in generating revenue or its intended purpose.
- Master the treatment and repercussions of leases in the context of financial accounting.
- Recognize the conditions for classifying a lease as either a capital or operating lease.
Verified Answer
MT
Learning Objectives
- Master the treatment and repercussions of leases in the context of financial accounting.
- Recognize the conditions for classifying a lease as either a capital or operating lease.