Asked by Victoria Nguyen on Apr 29, 2024
Verified
If a lessee classifies a lease as a capital lease and uses the straight-line method of amortization, the amount to be amortized over the lease term is
A) the original amount capitalized less the present value of the guaranteed residual value (if applicable)
B) the original amount capitalized less the unguaranteed residual value
C) the original amount capitalized less the guaranteed residual value (if applicable)
D) fair value of the leased property
Straight-Line Method
A depreciation method that allocates an equal amount of the depreciable cost of an asset to each year of the asset's useful life.
Capital Lease
An agreement that grants the lessee the right to use an asset for a long period, typically seen as a purchase by the lessee for accounting purposes.
Original Amount
The initial sum of money involved in a financial transaction, before any deductions, depreciation, or appreciation.
- Execute the computation of lease amortization while understanding the impact of residual values.
Verified Answer
SN
Sandile Nokuthula
May 02, 2024
Final Answer :
C
Explanation :
The amount to be amortized over the lease term for a lessee who classifies a lease as a capital lease and uses the straight-line method of amortization is the original amount capitalized less the guaranteed residual value (if applicable).
Learning Objectives
- Execute the computation of lease amortization while understanding the impact of residual values.