When depreciating a leased asset which it expects to buy,a lessee will use which of the following calculations to determine the annual depreciation amount?
A)Depreciable amount of leased asset / lease term.
B)Total of minimum lease payments / lease term.
C)Depreciable amount of leased asset / useful life of leased asset.
D)Useful life of leased asset/Total of minimum lease payments.

Question

Quizplus · Accepted Answer

The lessee will use the depreciable amount of the leased asset (which is the cost less estimated residual value) divided by the useful life of the asset to determine the annual depreciation amount. This calculation considers the fact that the lessee expects to purchase the asset at the end of the lease term and therefore will need to continue depreciating the asset once it becomes owned.

When Depreciating a Leased Asset Which It Expects to Buy,a