If a lease contains a residual value guarantee,the lessee must
A)add the guaranteed amount to the present value of the minimum lease payments.
B)add the present value of the guaranteed amount to the present value of the minimum lease payments.
C)include the guaranteed amount in the minimum lease payments only if the lessee intends to keep the asset at the end of the lease.
D)ignore the guaranteed amount if the lessee intends to keep the asset at the end of the lease.

Question

Quizplus · Accepted Answer

If a lease contains a residual value guarantee, the lessee must add the present value of the guaranteed amount to the present value of the minimum lease payments. This is because the residual value guarantee represents an additional liability for the lessee, as they may have to pay the difference between the guaranteed amount and the realized residual value at the end of the lease. Adding the present value of the guaranteed amount to the present value of the minimum lease payments reflects this additional liability and provides a more accurate representation of the total lease cost for the lessee.

If a Lease Contains a Residual Value Guarantee,the Lessee Must