If the asset in Question above were exactly equal to its undepreciated capital cost instead of zero,what effect would this change have on the financial lease analysis?

Question

Quizplus · Accepted Answer

If the asset were equal to its undepreciated capital cost, there would be no terminal loss because the value of the asset at the end of the lease term would not be lower than the residual value. However, the salvage value would now be a leasing cost since it would have to be paid by the lessee at the end of the lease term to take ownership of the asset. Therefore, the change would affect the lease analysis by removing the terminal loss and adding a new cost.

If the Asset in Question Above Were Exactly Equal to Its