On March 1 of the current year,Hill Corporation leased sound equipment from McEntire Company.The equipment has a life of 8 years.There is no bargain purchase option or passage of title.For the lease to be considered a capital lease,it must have a term of at least ________.
A)5 years
B)6 years
C)7 years
D)8 years

Question

Quizplus · Accepted Answer

According to FASB ASC 840, a lease must have a term of at least 75% of the asset's economic life (which in this case is 8 years) to be considered a capital lease. Therefore, the lease must have a term of at least 6 years (75% of 8 years), making option A the correct answer.

On March 1 of the Current Year,Hill Corporation Leased Sound