Snowy River Ltd Is a Lessee to Two Lease Arrangements

Snowy River Ltd is a lessee to two lease arrangements.Lease A is non-cancellable,contains a bargain purchase option and the lease term is equal to 75% of the economic life of the asset.Lease B is non-cancellable,lease term is less than 60% of the economic life of the asset and the minimum lease payment represents 75% of the fair value of the leased asset. How should Snowy River Ltd classify Lease A and Lease B respectively?

A) operating lease; operating lease
B) operating lease; finance lease
C) finance lease; finance lease
D) finance lease; operating lease

Correct Answer:

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