Problem:
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 ofthe 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?
Lease A Lease B
a. Capital lease Operating lease
b. Operating lease Capital lease
c. Operating lease Operating lease
d. Capital lease Capital lease