Which of the following correctly states a lessee criterion for classifying a lease as a capital lease?
A)The lessee guarantees the residual value.
B)The sum of the lease payments exceeds 90% of the fair value of the asset.
C)The asset is the property of the lessor at the end of the lease term.
D)The lease term is equal to 75% or more of the estimated economic life of the leased asset.

Question

Quizplus · Accepted Answer

According to accounting standards, a lease must be classified as a capital lease if it meets any one of four criteria, and one of the criteria is that the lease term is equal to 75% or more of the estimated economic life of the leased asset. Therefore, option D is the correct choice that states a lessee criterion for classifying a lease as a capital lease. The other options are incorrect because the lessee guaranteeing the residual value (Option A) is a lessor criterion, the sum of the lease payments exceeding 90% of the fair value of the asset (Option B) is one of the lessor criteria, and the asset being the property of the lessor at the end of the lease term (Option C) is not a valid criterion for classifying a lease as a capital lease.

Which of the Following Correctly States a Lessee Criterion for Classifying