On January 1, Year 1, WaterCo (lessor) and Lake Bistro (lessee) agreed to a 9-year lease for equipment that has an economic life of 10 years. Lake Bistro made its first annual payment on January 1, Year 2 for $6,000. Thereafter, eight more annual payments are due. Title reverts to Lake Bistro at the end of the lease term. The equipment has a fair market value at the lease inception date of $41,000. The discount rate is 5%.

Which one of the lease conditions below isnotmet?

The lease agreement transfers ownership of the leased asset.

The lease agreement contains a bargain purchase option.

The lease term is at least 75% of the assets remaining economic life.

The present value of the minimum lease payments is at least 90% of the leased assets value.