What Impact Does a Bargain Purchase Option Have on the Present

question 110

Multiple Choice

What impact does a bargain purchase option have on the present value of the minimum lease payments computed by the lessee?

• A) There is no impact as the option does not enter into the transaction until the end of the lease term.
• B) The lessee must increase the present value of the minimum lease payments by the present value of the option price.
• C) The lessee must decrease the present value of the minimum lease payments by the present value of the option price.
• D) The minimum lease payments would be increased by the present value of the option price if, at the time of the lease agreement, it appeared certain that the lessee would exercise the option at the end of the lease and purchase the asset at the option price.

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