A bargain purchase option in a finance lease affects the:
A)lessee's capitalized cost of the leased asset.
B)incremental target rate of return.
C)guaranteed residual value.
D)dealer's profit in a sales-type lease.

Question

Quizplus · Accepted Answer

A bargain purchase option allows the lessee to purchase the leased asset at a price significantly lower than its expected fair market value at the date the option becomes exercisable. This option affects the lessee's capitalized cost of the leased asset because it impacts the calculation of the present value of the minimum lease payments, which includes the bargain purchase option price.

A Bargain Purchase Option in a Finance Lease Affects The