Question

14. Which of the following statements regarding the calculation of the lessee's depreciation expense for a finance lease is true?

a. The bargain purchase option price is deducted from the original cost capitalized, and the difference is allocated over the estimated economic life of the asset.

b. The bargain purchase option price is included in the original cost capitalized, and depreciated over the term of the lease.

c. The unguaranteed residual value is included in the original cost capitalized, and the difference is allocated over the term of the lease.

d. The guaranteed residual value is not included in the original cost capitalized and not depreciated.

Answer 1

Guaranteed residual value should always be included in the cost of the asset. Also if the lessee chooses the option of buying the asset at the end then the final payment which is known as bargain purchase option price must be included in the cost and must be depreciated over the life of the asset.

ar The correct option for depreciation expense . مل ( a false, because if the sessce agrees to buy the asset at the end of the lease period, then it is the amount which have to be paid to the lessor and should be included in the costo (6) True, as the option amount paid at the end by the lessee to lessor is are capital expense and must be capitalised to the cost of the asset. (a) false, because the desee is tout not considered about the unguaranteed residual value. The lessee on only considers the guaranteed amount Hence, the unguaranteed residual value is not included in cal wlation of "present value of minimum Lease payments" in the books of lessee. (d) false, the guaranteed residual value es always included in the cast of the auet at while applying the method ok "present value of minimum Lease pay