Question

A lessee with a finance lease containing a bargain purchase option should depreciate the leased asset over the

period ending with the bargain purchase option date.

life of the asset or the term of the lease, whichever is longer.

term of the lease.

asset's remaining economic life.

Answer 1

When a finance lease has a bargain purchase option, the lessee should depreciate the leased asset over its remaining economic life, including the lease term and ownership period post-option exercise.

Step-by-step explanation:

In the context of finance leases, a lessee should depreciate the leased asset over the useful life when a bargain purchase option is involved.

The presence of a bargain purchase option typically indicates that the lessee intends to purchase the asset at the end of the lease term for a price significantly lower than the expected fair market value.

Therefore, the lessee should depreciate the asset over the asset's remaining economic life, which includes the lease term and the period after taking ownership through the bargain purchase option.