Snowy River Ltd Is a Lessee to Two Lease Arrangements

question 39

Multiple Choice

Snowy River Ltd is a lessee to two lease arrangements.Lease A is non-cancellable,contains a bargain purchase option and the lease term is equal to 75 per cent of the economic life of the asset.Lease B is non-cancellable,lease term is less than 60% of the economic life of the asset and the minimum lease payment represents 75% of the fair value of the leased asset. How should Snowy River Ltd classify Lease A and Lease B,respectively?

• A) Operating lease; Operating lease;
• B) Operating lease; Finance lease
• C) Finance lease; Finance lease;
• D) Finance lease; Operating lease;
• E) None of the given answers.

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