E1. Which of the following is a criterion for classifying a lease as a finance lease by the lessee?OA. The lease term is equal to 75% or more of the estimated economic life of the leased property.OB. The present value of the minimum lease payments is 75% or more of the fair value of the leased property.OC. The lease agreement contains an option to purchase the leased property at its fair value at the end of the lease term.OD. The lease agreement requires that title of the leased property remains with the lessor at the end of thelease term.

The correct answer is: (A) The lease term is equal to 75% or more of the estimated economic life of…

Answered: Which of the following is a criterion…

Business

Accounting

Which of the following is a criterion for classifying a lease as a finance lease by the lessee?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Leasing

Leasing is a contractual arrangement in which someone (a lessee) pays the owner (or lessor) of a building, land, vehicle, or other asset for the use of that asset. The lease is the agreement between lessee and lessor.

Question

E1.

Which of the following is a criterion for classifying a lease as a finance lease by the lessee?
OA. The lease term is equal to 75% or more of the estimated economic life of the leased property.
OB. The present value of the minimum lease payments is 75% or more of the fair value of the leased property.
OC. The lease agreement contains an option to purchase the leased property at its fair value at the end of the lease term.
OD. The lease agreement requires that title of the leased property remains with the lessor at the end of thelease term.

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