Final answer:
A lease that is for 50% of the asset's estimated economic life, with no transfer of ownership or bargain purchase option, should be classified as an operating lease by the lessee.
Step-by-step explanation:
If a lease term is 50% of the estimated economic life of the asset, does not transfer ownership of the property to the lessee by the end of the term, and no bargain purchase option exists, this lease should typically be classified as an operating lease by the lessee. According to most accounting standards, including the International Financial Reporting Standards (IFRS) and the generally accepted accounting principles (GAAP) in the United States, a lease is classified as a finance lease (or capital lease under previous GAAP standards) if any one of the following criteria are met: the lease transfers ownership of the asset to the lessee by the end of the lease term, there is a bargain purchase option, the lease term is for the majority of the economic life of the asset, or the present value of the lease payments equals or exceeds substantially all of the fair value of the leased asset.
However, given that the term is only 50% of the asset's economic life, and there's no ownership transfer or bargain purchase option, it does not meet the criteria for a finance lease and would, therefore, be considered an operating lease. Under an operating lease, the lessee records lease payments as an expense over the lease term, rather than capitalizing the asset and liability on their balance sheet.