Question

Office equipment recorded under a finance lease containing a bargain purchase option should be amortized under...

Office equipment recorded under a finance lease containing a bargain purchase option should be amortized under SFAS No. 13

A. Over the period of the lease using the interest method of amortization

B.Over the period of the lease using the straight-line method of amortization

C. In a manner consistent with the lessee's normal depreciation policy for owned assets

D.In a manner consistent with the lessee's normal depreciation policy for owned assets except that the period of amortization should be the lease term

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Answer #1

Answer: Option C) In a manner consistent with the lessee's normal depreciation policy for owned assets

Explanation:

as per SFAS No. 13

- if the lease transfers ownership of the property to the lessee by the end of the lease term or

- the lease contains a bargain purchase option then;

the asset shall be amortized in a manner consistent with the lessee's normal depreciation policy for owned assets.

If the lease does not meet either criterion , the asset shall be amortized in a manner consistent with the lessee's normal depreciation policy except that the period of amortization shall be the lease term.

Thus, our answer is option C.

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