Which of the following lease criteria would not qualify a lease as a capital lease?
A) The lease transfers ownership of the property to the lessee by the end of the lease term.
B) The lease contains an option to purchase the leased property at its fair market value.
C) The lease term is equal to or greater than 75% of the estimated economic life of the leased property.
D) The present value of the minimum lease payments equals or exceeds 90% of the fair value of the leased property.

Question

Quizplus · Accepted Answer

The option to purchase must be bargain purchase; not at fair market value. A noncancelable lease must meet any of the following four criteria to be classified as a capital lease; 1) The lease transfers ownership of the property to the lessee, 2) The lease contains a bargain purchase option, 3) The lease term is equal to or greater than 75% of the estimated economic life of the leased property, and 4) The present value of the minimum lease payments equals or exceeds 90% of the fair value of the leased property.

Which of the Following Lease Criteria Would Not Qualify a Lease