Question

Only ONE must be true for it to be a capita al lease (Criteria Applicable to BOTH lessee and lessor)

Answer 1

To be classified as a capital lease, only one criteria needs to be true. Examples of criteria include transfer of ownership, bargain purchase option, and lease term length.

Step-by-step explanation:

To be considered a capital lease, there are certain criteria applicable to both the lessee and lessor. Only one of these criteria needs to be true for a lease to be classified as a capital lease. Some of the criteria include:

1. The lease transfers ownership of the asset to the lessee at the end of the lease term.
2. The lease contains a bargain purchase option, allowing the lessee to purchase the asset at a significantly lower price.
3. The lease term is for a major part of the asset's economic life.

These are just a few examples of the criteria that determine whether a lease is a capital lease or an operating lease.