Which of the following statements regarding a bargain purchase option is true?
A) The bargain purchase option is included in the minimum lease payments for the lessee but not the lessor.
B) The lessee subtracts the present value of the bargain purchase option from the present value of the minimum rental payments to determine the lease obligation.
C) A bargain purchase option reduces the amount of the investment that the lessor must recover from the minimum lease payments.
D) The lessor subtracts the present value of the bargain purchase option from the present value of the rental payments to determine the lease receivable.

Question

Quizplus · Accepted Answer

A bargain purchase option reduces the amount of the investment that the lessor must recover from the minimum lease payments because it is expected that the lessee will exercise the option, thus providing additional cash flow to the lessor.

Which of the Following Statements Regarding a Bargain Purchase Option