For a leased asset under a lease that qualifies as a capital lease, 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

The lessee should use the useful life of the leased asset as the depreciation period because they are considered the economic owner of the asset under a capital lease. The useful life is the estimated period of time that the asset can be used in the ordinary course of business before it becomes obsolete or loses its expected utility.

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