1. Lease A does not contain a bargain purchase option, but the lease term is equal to 90% of the estimated economic life of the leased property. Lease B does not transfer ownership of the property to the lessee by the end of the lease term, but the lease term is equal to 60% of the estimated economic life of the leased property. How should the lessee classify these leases?

LEASE A LEASE B

a.) Operating Lease....................Finance Lease

b.) Operating Lease...................Operating Lease

c.) Finance Lease........................Finance Lease

d.) Finance Lease.....................Operating Lease

2.) On January 1, 2017, Dillon Company granted stock options to officers and key employees for the purchase of 10,000 shares of the companys $1 pay common stock at $20 per share as additional compensation for services to be rendered over the next three years. The options are exercisable during a five-year period beginning January 1, 2020 by grantees still employed by Dillon Company. The Black-Scholes option pricing model determines total compensation expense to be $90,000. The market price of common stock was $20 per share at the date of grant. The journal entry to record the compensation expense related to these options for 2017 would include a credit to the paid-in-capital-Stock Options account for

a.) $0

b.) $18,000

c.) $20,000

d.) $30,000

e.) $90,000