All of the following would qualify as a capital lease except:
A)The lease term is 80% of the asset's estimated useful life.
B)The lease agreement contains a bargain purchase option.
C)The present value of the lease payments equals 70% of the fair value of the leased asset.
D)Title to the leased asset transfers to the lessee at the end of the lease term.
E)The lease term equals 90% of the asset's estimated useful life.

Question

Quizplus · Accepted Answer

A lease qualifies as a capital lease if it meets any of the following criteria: the lease term is equal to or greater than 75% of the asset's estimated useful life, there is a transfer of ownership by the end of the lease term, there is a bargain purchase option, or the present value of the lease payments equals or exceeds 90% of the fair value of the leased asset. Option C does not meet these criteria because it states the present value of the lease payments equals 70% of the fair value, which is below the 90% threshold.

All of the Following Would Qualify as a Capital Lease