An airline has the following data about an airplane:

Annual lease cost $ 11 comma 000 comma 000$11,000,000

Lease term:

2020

yearsUseful life of airplane:

2525

years

Fair market value of leased asset: $85 million

Present value of lease payments: $75 million

Bargain purchase option: None

Transfer to lessor at end of lease? Yes

Is this a finance or operating lease? Why?

A.

This is an operating lease. It fails all the finance lease criteria.

B.

This is an operating lease because it meets at least one of the five operating lease criteria.

C.

This is a finance lease because it meets at least one of the five finance lease criteria.

D.

This is a finance lease because the leased asset cost exceeds $5 million.