For a sales-type lease,
A) the sales price includes the present value of the unguaranteed residual value.
B) the present value of the guaranteed residual value is deducted to determine the cost of goods sold.
C) the gross profit will be the same whether the residual value is guaranteed or unguaranteed.
D) None of these answers are correct.

Question

Quizplus · Accepted Answer

In a sales-type lease, the gross profit is determined at the inception of the lease and is not affected by whether the residual value is guaranteed or unguaranteed.

For a Sales-Type Lease