Question

If a finance lease contains a bargain purchase option, the lessee should amortize the leased asset: Multiple Choice Over the term of the lease. Without reference to the economic life of the asset. Over the economic life of the asset. Without reference to the term of the lease.

Answer 1

Answer:

Over the economic life of the asset.

Explanation:

An asset obtained under a financial lease must be depreciated in the same way as the company would depreciate any other similar fixed asset. E.g. a leased truck should be depreciated similarly to other trucks owned by the company.

In a financial lease, the lessor amortizes the asset's value, while the lessee depreciates the assets as common fixed assets (a lessee doesn't amortize).