Lease Y Does Not Contain a Bargain Purchase Option, but the Lease

question 12

Multiple Choice

Lease Y 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 Z 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?
Lease Y Lease Z

• A) Capital lease Operating lease
• B) Capital lease Capital lease
• C) Operating lease Capital lease
• D) Operating lease Operating lease

---

Definitions:

Benchmarking

The practice of comparing business processes and performance metrics to industry bests and best practices from other companies.

Fishbone Diagram

A visual tool used to identify, explore, and display the possible causes of a particular problem.

Flowcharting

A graphical representation of a process, illustrating the sequence of operations or steps involved, often used in planning and problem-solving.

Run Chart

A simple graphical tool used to display observed data in time order, commonly used in quality improvement processes to identify trends.