Which of the following correctly states a lease capitalization criterion from the point of view of the lessee?
A)Collectibility of the lease payments is reasonably certain.
B)The present value of the minimum lease payments is equal to 75% or more of the fair value of the leased property.
C)The lease contains a bargain purchase option.
D)The lease term is equal to at least 85% of the estimated economic life of the leased asset.

Question

Quizplus · Accepted Answer

A lease contains a bargain purchase option is one of the criteria for capitalization by the lessee, as it indicates that the lessee is likely to purchase the asset at a price significantly lower than its fair value, effectively transferring ownership.

Which of the Following Correctly States a Lease Capitalization Criterion