A guaranteed residual value at the inception of a capital lease should be:
A)Excluded from minimum lease payments.
B)Included as part of minimum lease payments at present value.
C)Included as part of minimum lease payments at future value.
D)Included as part of minimum lease payments only to the extent that guaranteed residual value is expected to exceed estimated residual value.

Question

Quizplus · Accepted Answer

A guaranteed residual value should be included as part of minimum lease payments at present value at the inception of a capital lease. This is because the lessor is essentially guaranteeing a future value for the leased asset, and this value is factored into the calculation of minimum lease payments. Including the guaranteed residual value ensures that the lessee will cover the full cost of the asset over the lease term, including the residual value.

A Guaranteed Residual Value at the Inception of a Capital