If a leased asset has a negative residual value, for example, as a result of a statutory requirement to dispose of an asset in an environmentally
1.
sound manner, the lessee of the asset could reasonably expect to pay a lower lease rate because the asset does not have a positive residual value.

Question

Quizplus · Accepted Answer

The lease rate is determined by various factors including the cost of the asset, financing terms, and expected residual value, but a negative residual value could actually lead to higher lease rates as the lessor may seek to recover the expected disposal costs over the lease term.

If a Leased Asset Has a Negative Residual Value, for Example