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

Question

Quizplus · Accepted Answer

According to accounting standards, a lease is considered a capital (or finance) lease if any of the following criteria are met: 
- The lease transfers ownership of the asset to the lessee by the end of the lease term (Option D) 
- The lease contains a bargain purchase option that the lessee is reasonably certain to exercise (Option C) 
- The lease term is at least 75% of the asset's estimated economic life (Option B) 
- The present value of the lease payments is at least 90% of the fair value of the leased asset (not 70% as in Option A).

All of the Following Criteria Would Qualify a Lease as a Capital