Which of the following is a correct statement of one of the capitalization criteria?
A) The lease transfers ownership of the property to the lessor.
B) The lease contains a purchase option.
C) The lease term is equal to or more than 75% of the estimated economic life of the leased property.
D) The minimum lease payments (excluding executory costs) equal or exceed 90% of the fair value of the leased property.

Question

Quizplus · Accepted Answer

According to the capitalization criteria, a lease should be capitalized if the lease term is equal to or more than 75% of the estimated economic life of the leased property. Option A is incorrect as a lease does not transfer ownership of the property to the lessor. Option B is incorrect as the purchase option does not determine whether or not the lease should be capitalized. Option D is incorrect as it pertains to the minimum lease payments exceeding a certain percentage of the fair value of the leased property, which is not a capitalization criteria.

Which of the Following Is a Correct Statement of One