Which of the following statements regarding the calculation of the lessee's depreciation expense for a capital 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 guaranteed residual value is deducted from the original cost capitalized, and the difference is allocated over the estimated economic life of the asset.
C)The unguaranteed residual value is deducted from the original cost capitalized, and the difference is allocated over the term of the lease.
D)The guaranteed residual value is deducted from the original cost capitalized, and the difference is allocated over the term of the lease.

Question

Quizplus · Accepted Answer

The lessee's depreciation expense for a capital lease is calculated as the difference between the capitalization amount (original cost of the asset less the present value of the minimum lease payments) and the guaranteed residual value (if any), divided by the lease term. Therefore, the guaranteed residual value is deducted from the original cost capitalized, and the difference is allocated over the term of the lease. Choice A is incorrect because the bargain purchase option price is not deducted from the original cost capitalized but rather compared to the asset's fair market value at the end of the lease term. Choice B is incorrect because the guaranteed residual value is not allocated over the estimated economic life of the asset but rather over the lease term. Choice C is incorrect because the unguaranteed residual value does not affect the calculation of the lessee's depreciation expense.

Which of the Following Statements Regarding the Calculation of the Lessee's