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Basic Question 13 of 16
How will a lease that involves both land and buildings and a bargain purchase option be treated?
B. The buildings will be capitalized and amortized but the land portion is an operating lease.
C. The buildings will be capitalized and amortized but the land portion is capitalized and not amortized.
A. The entire lease will be an operating lease since land does not have a useful life.
B. The buildings will be capitalized and amortized but the land portion is an operating lease.
C. The buildings will be capitalized and amortized but the land portion is capitalized and not amortized.
User Contributed Comments 5
| User | Comment |
|---|---|
| Gigem | It might be a good idea to touch on what a bargain purchase option is in the notes if it is going to be part of the test. |
| fool | It's in the notes: that means the leasse has the option to buy the property at the end of the leasing period for a good price. It's one of 4 conditions. |
| magicchip | land is not amortized, and bargain purchase makes it a capital lease. |
| johntan1979 | That's right, fool. |
| Seancfa1 | hohoho |
I used your notes and passed ... highly recommended!
Lauren
Learning Outcome Statements
explain the financial reporting of leases from the perspectives of lessors and lessees
CFA® 2024 Level I Curriculum, Volume 2, Module 8.