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Recording a Capital Lease with bargain purchase option

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We have been paying a rental fee for a forklift but are at the end of the contract and will be buying it out for $1.00.

What is the accounting transaction for a Capital Lease with the $1 Buyout?

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Solution Summary

The tutorial explains the approach and gives you an example (with dollar amounts) of an asset that was purchased and depreciated and then purchased at the end of the lease for $1.

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If you have had a forklift under a capital lease, you have recorded it as an asset and have been depreciating it over the lease term. Upon buying the asset at the end of the lease, you record the $1 plus the salvage value (the book value at the end of the ...

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Carol Sargent, PhD
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  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
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