(Answered) Question - capital leases show higher expenses in the early

Accounting

Question - Capital leases show higher expenses in the early years of the lease which reduces net income and the company needs to record the lease as an asset and liability in the balance sheet. For these reasons, many companies try to avoid the lease asset capitalization and at times can get creative when it comes to interpreting a lease contract agreement.

So what is the effect of a bargain purchase option on accounting for a capital-lease transaction by a lessee?

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