The Amount of a Lease Receivable Recorded by the Lessor

question 56

Multiple Choice

The amount of a lease receivable recorded by the lessor for a direct finance lease should equal at the beginning of the lease term:

• A) The aggregate of the present value of the minimum lease and executory payments and the present value of any unguaranteed residual value expected to accrue to the benefit of the lessor at the end of the lease term.
• B) The aggregate of the present value of the minimum lease payments and the present value of any unguaranteed residual value expected to accrue to the benefit of the lessor at the end of the lease term. Any initial direct costs should also be included in the lease receivable.
• C) The aggregate of the present value of the total lease payments and the present value of any guaranteed residual value expected to accrue to the benefit of the lessor at the end of the lease term.
• D) The aggregate of the present value of the minimum lease payments and the present value of any guaranteed residual value expected to accrue to the benefit of the lessor at the end of the lease term, plus any initial direct costs.
• E) None of the given answers.

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Definitions:

Sales Returns

Transactions where customers return previously purchased products, leading to a reversal of sales revenue.

Cost of Goods Sold

The direct costs attributable to the production of the goods sold in a company, including materials and labor.

Net Sales

The amount of sales revenue remaining after deducting returns, allowances for damaged or missing goods, and discounts.

Gross Profit

The difference between net sales and the cost of goods sold, indicating the profit made before deducting expenses like salaries and rent.