Which of the following alternatives is not a criterion for determining whether a lease is a capital lease?
A) The lease agreement transfers legal title of the asset to the lessee at the end of the lease term.
B) The lease agreement includes a "bargain purchase option" that can be exercised by the lessee.
C) The term of the lease covers 75% or more of the asset's economic life.
D) The present value of the lease payments is equal to 90% or more of the fair market value of the leased asset.
E) The current value of the leased asset approximates 75% of the total lease payments that will occur over the life of the asset.

Question

Quizplus · Accepted Answer

The criteria for determining whether a lease is a capital lease include: transfer of ownership at the end of the lease term, a bargain purchase option, lease term covering 75% or more of the asset's economic life, and present value of lease payments being 90% or more of the fair market value. The current value of the leased asset approximating 75% of the total lease payments is not a criterion for a capital lease.

Which of the Following Alternatives Is Not a Criterion for Determining