Which of the following qualifies as a capital lease?
A) Three-year lease on a company vehicle
B) Five-year lease on equipment with an option to renew for one more year
C) Seven-year lease on a machine that has a seven-year useful life
D) Monthly lease on office space that can be canceled with 30 days' notice

Question

Quizplus · Accepted Answer

A capital lease is a lease of a fixed asset that transfers substantially all the rights and obligations of ownership from the lessor to the lessee. In this case, a seven-year lease on a machine that has a seven-year useful life is considered a capital lease as it transfers ownership rights substantially to the lessee. The other choices do not meet the criteria for a capital lease.

Which of the Following Qualifies as a Capital Lease