By the lessor, a lessee-guaranteed residual value at the beginning of a finance lease should be:
A) Excluded from lease payments.
B) Included as part of lease payments at present value.
C) Included as part of lease payments at future value.
D) Included as part of lease payments only to the extent that guaranteed residual value is expected to exceed estimated residual value.

Question

Quizplus · Accepted Answer

The guaranteed residual value is a promise made by the lessee to return a certain asset value to the lessor at the end of the lease for a guaranteed amount. Since this promise is a potential future payment, it must be included in the calculation of the present value of the lessor's future lease payments.

By the Lessor, a Lessee-Guaranteed Residual Value at the Beginning