QUESTION 29

Lease A does not contain a bargain purchase option, but the lease term is equal to 90 percent 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 75 percent of the estimated economic life of the leased property. How should the lessee classify these leases under U.S. GAAP?

Lease ALease B

1. Operating leaseCapital lease
2. Operating leaseOperating lease
3. Capital leaseCapital lease
4. Capital leaseOperating lease