The lessee must record a lease as an asset if the lease
A) transfers ownership of the property to the lessor.
B) contains a purchase option.
C) term is 75% or more of the useful life of the leased property.
D) payments equal or exceed 90% of the fair market value of the leased property.

Question

Quizplus · Accepted Answer

According to the generally accepted accounting principles (GAAP), a lessee must record a lease as an asset if the lease term is 75% or more of the useful life of the leased property. This is because the lease term is significant enough to substantially transfer the benefits and risks of ownership to the lessee, making it similar to an ownership interest in the property. Options A, B, and D do not necessarily require recording the lease as an asset.

The Lessee Must Record a Lease as an Asset If