Which one of the lease conditions below is not met? Select one: A. The lease agreement transfers ownership of the leased asset. B. The present value of the minimum lease payments is at least 90% of the leased asset's value. C. The lease agreement contains a bargain purchase option. D. The lease term is at least 75% of the asset's remaining economic life.
Which one of the lease conditions below is not met? Select one: A. The lease agreement transfers ownership of the leased asset. B. The present value of the minimum lease payments is at least 90% of the leased asset's value. C. The lease agreement contains a bargain purchase option. D. The lease term is at least 75% of the asset's remaining economic life.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On January 1, Year 1, Indiana Water (lessor) and Koontz Lake (lessee) agreed to a 9-year lease for equipment that has an economic life of 10 years. Koontz Lake made its first annual payment on January 1, Year 2 for $3,000. Thereafter, eight more annual payments are due. Title reverts to Koontz Lake at the end of the lease term. The equipment has a fair market value at the lease inception date of $20,500. The discount rate is 5%.
Which one of the lease conditions below is not met?
Which one of the lease conditions below is not met?
Select one:
A. The lease agreement transfers ownership of the leased asset.
B. The present value of the minimum lease payments is at least 90% of the leased asset's value.
C. The lease agreement contains a bargain purchase option.
D. The lease term is at least 75% of the asset's remaining economic life.
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