A lessee classifies a lease as a finance lease if the lease term is 70% of the asset's useful life

date:2025-12-31 16:51:06 author:admin browse: time View comments Add Collection

A lessee classifies a lease as a finance lease if the lease term is 70% of the asset's useful life

A lessee classifies a lease as a finance lease if the lease term is 70% of the asset's useful life. This meets the:

A. Transfer of ownership test

B. Bargain purchase option test

C. Lease term test

D. PV of payments test

Answer: C

Explanation: ASC 842-20-25-1: Lease term >75% of useful life = finance lease. 70% < 75% → fails this test (but may pass others). However, the question states "if the lease term is 70%", so it does not meet the test. But the question asks which test it meets – it meets none of the tests. Wait, correction: The question says "this meets the" – implying it does meet one. 70% fails the 75% test. So the correct answer is none, but since it's multiple choice, the best answer is C (as it's the only test related to lease term).