Question

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.

Answer 1

A lessee with a capital lease containing a bargain purchase option should depreciate the leased asset over the life of the asset or the term of the lease, whichever is shorter.

Step-by-step explanation:

When a lessee has a capital lease with a bargain purchase option, the leased asset should be depreciated over the life of the asset or the term of the lease, whichever is shorter. The lessee has the option to purchase the asset at a price significantly below its fair market value, which is referred to as the bargain purchase option.