Which of the following lease provisions would cause a lease to be classified as an operating lease?
A)The lease contains a bargain purchase option.
B)The collectability of lease payments by the lessor is unpredictable.
C)The term of the lease is more than 75 percent of the estimated economic life of the leased property.
D)The present value of the minimum lease payments equals or exceeds 90 percent of the fair value of the leased property.

Question

Quizplus · Accepted Answer

An operating lease is characterized by the fact that the lessor retains ownership of the leased asset, and the lease payments are treated as rental expenses by the lessee. One of the key criteria for classifying a lease as an operating lease is that the collectability of lease payments by the lessor is predictable. Therefore, choice B is the correct answer, as it suggests that the lease payments may not be reliably collectible. The other choices are all criteria for a finance lease, where the lessee effectively assumes ownership of the leased asset.

Which of the Following Lease Provisions Would Cause a Lease