Final answer:
The correct answer is to amortize the leased asset over the economic life of the asset when a finance lease contains a bargain purchase option. This aligns with the asset's projected period of use and recognizes that the lessee is likely to obtain ownership.
Step-by-step explanation:
When a finance lease contains a bargain purchase option, the lessee should amortize the leased asset over the economic life of the asset (option c). This approach is taken because the bargain purchase option indicates that the lessee is likely to purchase the asset at the end of the lease term. Since the option makes it probable that the lessee will obtain ownership, the asset should be amortized as if it is owned by the lessee, which aligns with the asset's utility over time.
Amortization in this context refers to the systematic write-down of the cost of the asset less the residual value over its economic life. This ensures that the expense recognition is matched with the benefits derived from the use of the asset. If the lease term is shorter than the economic life, the asset should still be amortized over the longer period, reflecting its continued use beyond the lease term.