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

question 51

Multiple Choice

Lease X 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 Y 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 X Lease Y

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

---

Definitions:

Production Possibility Frontier

A curve depicting all maximum output possibilities for two goods, given a set of inputs and production technology, illustrating the concept of opportunity cost.

Production Possibility Frontier

A curve depicting all maximum output possibilities for two or more goods given a set of inputs (resources, labor, etc.), demonstrating the trade-offs in production volume between different commodities.

Oil

A viscous liquid derived from petroleum, used as fuel and in various industrial applications.

Football Helmets

Protective headgear used in American football designed to reduce the risk of head injuries.