A lessee with a capital lease containing a bargain purchase option should depreciate the leased asset over the
A) asset's remaining economic life.
B) term of the lease.
C) life of the asset or the term of the lease, whichever is shorter.
D) life of the asset or the term of the lease, whichever is longer.

Question

Quizplus · Accepted Answer

A lessee with a capital lease containing a bargain purchase option should depreciate the leased asset over the asset's remaining economic life. This is because the bargain purchase option implies the lessee is likely to purchase the asset at the end of the lease term, making it appropriate to depreciate the asset over its entire economic life rather than just the lease term.

A Lessee with a Capital Lease Containing a Bargain Purchase