Office LLC (a lessor) enters into a lease of a newly constructed office building. The lease term is ten years. For the first

5 years, the rent is $5,000 per month and for the second five years, the rent increases to $6,000 per month. There is

a clause in the contract that makes Office LLC responsible for any increase in property taxes that may occur. The

lessor is responsible for all repairs and office maintenance. At the commencement of the lease, another office

building with similar characteristics to the leased asset has an estimated useful life of 50 years.

Which of the following statements is correct?

Office LLC (a lessor) enters into a lease of a newly constructed office bullding. The lease term is ten years. For the first 5 years, the rent is $5,000 per month and for the second five years, the rent increases to $6,000 per month. Thereis a clause in the contract that makes Office LLC responsible for any increase in property taxes that may occur. The lessor is responsible for all repairs and office maintenance. At the commencement of the lease, another office building with similar characteristics to the leased asset has an estimated useful life of 50 years. Which of the following statements is correct? Select the one correct option and then select Submit. Office LLC should classify the lease as operating because the lease term is not for the major part of the economic life of the building so the lessor does not transfer substantially all the risks and rewards incidental to ownership of a leased office space, Office LLC should classify the lease as operating because it is responsible for all repairs and office maintenance during the lease and any increase in property taxes. Office LLC should classify the lease as finance because the change in the rent payment between the first five years and the second five years of the lease is not substantial. Office LLC should classify the lease as finance because the lease term is for the major part of the economic life of the building