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NEW QUESTION: 1
Lease A does not contain a bargain purchase option, but the lease term is equal to 90% of the estimated economic life of the leased property. Lease B does not transfer ownership of the property to the lessee by the end of the lease term, but the lease term is equal to 70% of the estimated economic life of the leased property. How should the lessee classify these leases?
A. Lease A: Operating lease; Lease B: Operating lease
B. Lease A: Capital lease; Lease B: Capital lease
C. Lease A: Capital lease; Lease B: Operating lease
Answer: C
Explanation:
If the lease term equals or exceeds (>=) 75% of the asset's economic life, the lease should be categorized as a capital lease by the lessee.

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