For a leased asset under a lease that qualifies as a capital lease because of a bargain purchase option,the depreciation period used by the lessee must be:
A)The same period that was used by the lessor.
B)The useful life to the lessee.
C)The term of the lease regardless of the lease provisions.
D)The remaining life of the asset at the time the lease agreement took effect.

Question

Quizplus · Accepted Answer

When a lease is a capital lease due to a bargain purchase option, the lessee is essentially the owner of the asset and is responsible for recording depreciation on the asset over its useful life. Therefore, the depreciation period used by the lessee should be the useful life to the lessee, which is typically shorter than the lease term. The remaining choices are incorrect because the depreciation period should not be based on the period used by the lessor, the term of the lease, or the remaining life of the asset.

For a Leased Asset Under a Lease That Qualifies as a Capital