If a lessee does not exercise a bargain purchase option prior to its lapse date, the:
A)bargain purchase option cannot lapse because this option was included in computing the annual rental amounts.
B)lessee continues to record depreciation on the lease asset because it was assumed from the beginning that the lessee would retain ownership of the asset.
C)lessee recognizes a gain due to the lapse.
D)lessee recognizes a loss due to the lapse.

Question

Quizplus · Accepted Answer

If a lessee does not exercise a bargain purchase option, they may recognize a loss due to the lapse because they lose the opportunity to purchase the asset at a favorable price.

If a Lessee Does Not Exercise a Bargain Purchase Option