Which one of these conditions must be met for a lease to qualify as a capital lease?

Question

Quizplus · Accepted Answer

A capital lease must meet at least one of the following conditions: (1) transfer of ownership at the end of the lease, (2) option to purchase the asset at a bargain price, (3) lease term is equal to 75% or more of the useful life of the asset, (4) present value of lease payments is equal to or exceeds 90% of the fair market value of the asset. So, option A correctly identifies one of the conditions that must be met for a lease to qualify as a capital lease. Options B and C are incorrect because the value or life of the lease does not determine whether it is a capital lease or not. Option D is incorrect because only option A is correct, not all the other answers.

Which One of These Conditions Must Be Met for a Lease