Question: Lease M does not contain a bargain purchase option, but the lease term is equal to 90% of the estimated economic life of the leased

Lease M does not contain a bargain purchase option, but the lease term is equal to 90% of the estimated economic life of the leased property. Lease P does not transfer ownership of the property to the lessee at the end of the lease term, but the lease term is equal to 75% of the estimated economic life of the leased property. How should the lessee classify these leases?

Lease M Lease P

a. Capital lease Operating lease

b. Capital lease Capital lease

c. Operating lease Capital lease

d. Operating lease Operating lease

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