Which of the following lease provisions would cause a lease to be classified as an operating lease?
A) The lease contains a bargain purchase option.
B) The collectibility of lease payments by the lessor is unpredictable.
C) The term of the lease is more than 75 percent of the estimated economic life of the leased property.
D) The present value of the minimum lease payments equals or exceeds 90 percent of the fair value of the leased property.

Question

Quizplus · Accepted Answer

According to ASC 842, a lease would be classified as an operating lease if the collectibility of lease payments by the lessor is predictable, and the lease term is less than 75 percent of the estimated economic life of the leased property. Therefore, option B is the only provision that indicates an operating lease. Option A indicates a finance lease, option C indicates a capital lease, and option D is not a determining factor for lease classification.

Which of the Following Lease Provisions Would Cause a Lease