Which of the Following Statements Regarding the Calculation of the Lessee's

question 65

Multiple Choice

Which of the following statements regarding the calculation of the lessee's depreciation expense for a capital lease is true?

• A)The bargain purchase option price is deducted from the original cost capitalized, and the difference is allocated over the estimated economic life of the asset.
• B)The guaranteed residual value is deducted from the original cost capitalized, and the difference is allocated over the estimated economic life of the asset.
• C)The unguaranteed residual value is deducted from the original cost capitalized, and the difference is allocated over the term of the lease.
• D)The guaranteed residual value is deducted from the original cost capitalized, and the difference is allocated over the term of the lease.

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Definitions:

Current Assets

Assets that are expected to be converted into cash, sold, or consumed within one year or within the business's operating cycle, whichever is longer.

Balance Sheet

A financial statement that shows the assets, liabilities, and equity of a company at a specific point in time, reflecting its financial position.

Prepaid Insurance

An asset account representing insurance payments made in advance for future coverage periods, recognizing expense over the coverage term.

Current Asset

An asset likely to be converted into cash within a year, used in the normal operations of a business.