Question

Ajax Ltd. is the lessee under a finance lease with a provision to purchase the leased asset at the end of the lease term for a bargain price. The depreciation (leased asset amortization) period used by the Ajax must be

Question 8 options:

	the term of the lease.
	the useful life of the leased asset.
	whatever depreciation period the lessor was using.
	either the term of the lease or the useful life of the leased asset, whichever is shorter.

Answer 1

Solution:

Ajax Ltd. is the lessee under a finance lease with a provision to purchase the leased asset at the end of the lease term for a bargain price. The depreciation (leased asset amortization) period used by the Ajax must be

the useful life of the leased asset.

Explanation: When there is a transfer of ownership or BPO otion available, the asset is depreciated over the its economic life of the asset and not the lease term,

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