Final answer:
The amount to be capitalized for a lease with a bargain purchase option should include the payment for the bargain purchase option, added at its present value.
Step-by-step explanation:
When calculating the amount to capitalize as a right-of-use asset for a lease with a bargain purchase option, the payment called for by the option should be added at its present value. This means that the correct answer is (c) Added at its present value.
The logic behind this is rooted in the concept of present discounted value, which is a critical analytical tool used in various decision-making scenarios, including business investments and policy evaluations. By considering the present value of the option, you are including the potential cost (or benefit) at today's value, which provides a more accurate representation of the asset's value on the balance sheet. It's important to incorporate this potential future payment into the overall valuation of the lease since a bargain purchase option is essentially an economic component of the lease's terms.
When a lease includes a bargain purchase option, it means that the lessee has the option to purchase the leased asset at a price significantly below its fair market value at the end of the lease term.
To account for this option in the calculation of the right-of-use asset, the payment associated with the bargain purchase option should be added at its present value. This ensures that the lessee recognizes the economic benefit of the option as part of the asset's initial value.