Final answer:
A lessee would classify a lease as a capital lease if the lease meets specific criteria such as containing a purchase option, transferring ownership to the lessee, the lease term equaling 75% or more of the asset's economic life, or the lease payments equaling at least 90% of the asset's fair value.
Step-by-step explanation:
The student has presented a question on how a lessee would classify a lease. A lessee would classify a lease as a capital lease under certain conditions, such as if each of the following is true: (a) the lease contains a purchase option, (b) the lease transfers ownership of the asset to the lessee rather than the lessor, (c) the lease term is equal to 75% or more of the economic life of the leased asset, or (d) the minimum lease payments equal or exceed 90% of the fair value of the leased asset. These criteria help to distinguish between a capital lease and an operating lease, affecting how the lease is reported in the lessee's financial statements.
A capital lease is classified by the lessee if certain criteria are met. One of the criteria is that the lease term is equal to 75% or more of the economic life of the leased asset. Another criterion is that the minimum lease payments equal or exceed 90% of the fair value of the leased asset. Additionally, if the lease contains a purchase option or transfers ownership of the asset to the lessor, it would be classified as a capital lease.