U.S.GAAP specifies criteria for a capital lease.Which of the following is not one of the criteria?
A)The lease transfers ownership of the leased asset to the lessee at the end of the lease term.
B)Transfer of ownership at the end of the lease term seems likely because the lessee has a bargain purchase option.
C)The lease extends for at least 75% of the asset's expected useful life.
D)The lease extends for at least 50% of the asset's expected useful life.
E)The present value of the contractual minimum lease payments equals or exceeds 90% of the fair value of the asset at the time the lessee signs the lease using a discount rate appropriate for the creditworthiness of the lessee.

Question

Quizplus · Accepted Answer

The criterion that is not specified by U.S.GAAP is that the lease must extend for at least 50% of the asset's expected useful life. U.S.GAAP specifies that a capital lease must meet three of the four following criteria: transfer of ownership at the end of the lease term seems likely because the lessee has a bargain purchase option, the lease extends for at least 75% of the asset's expected useful life, the present value of the contractual minimum lease payments equals or exceeds 90% of the fair value of the asset at the time the lessee signs the lease using a discount rate appropriate for the creditworthiness of the lessee, and the leased asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term.

USGAAP Specifies Criteria for a Capital Lease