If a Lessee Does Not Exercise a Bargain Purchase Option

question 178

Multiple Choice

If a lessee does not exercise a bargain purchase option prior to its lapse date,the:

• A) 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.
• B) bargain purchase option cannot lapse because this option was included in computing the annual rental amounts.
• C) lessee recognizes a loss due to the lapse.
• D) lessee recognizes a gain due to the lapse.

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Definitions:

Long-Run Average Cost

The average cost per unit of output where all inputs, including capital, are variable in the long term.

Marginal Cost

The costs entailed in generating an extra unit of a product or service.

Economies of Scale

The reduction in per-unit production costs resulting from an increase in the scale of production.

Service Provider

A company or an individual that offers services to others in exchange for payment, such as telecommunications, utilities, or healthcare.