Which statement is correct about the bargain purchase option (BPO)?
A)It is cash that the lessee will receive at the end of the lease.
B)It cannot be assumed that the BPO will be exercised.
C)It is excluded in the minimum lease payment calculation.
D)It means that ownership will transfer to the lessee.

Question

Quizplus · Accepted Answer

The bargain purchase option (BPO) allows the lessee to purchase the leased asset at a price lower than its fair market value at the end of the lease term. If the lessee exercises the BPO, ownership of the asset will transfer to them. Therefore, option D is the correct statement. Option A is incorrect because the BPO is not a cash payment but an option to purchase the asset. Option B is partially correct because it is not certain whether the lessee will exercise the BPO or not. Option C is incorrect because the BPO is included in the minimum lease payment calculation.

Which Statement Is Correct About the Bargain Purchase Option (BPO)