A Lessor Enters into a Sales-Type Lease

question 34

Multiple Choice

A lessor enters into a sales-type lease.Which of the following statements is true if the leased asset has an unguaranteed residual value?

• A)The gross profit recognized is less than it would be if the residual was guaranteed.
• B)The gross profit recognized is more than it would be if the residual was guaranteed.
• C)The lessor should decrease the cost of goods sold by the amount of the unguaranteed residual value.
• D)The gross profit is the same as it would be if the residual was guaranteed.

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Definitions:

Investment In Bonds

The purchase of bonds issued by corporations, governments, or other entities as a means of earning interest income and potential price appreciation.

Comprehensive Income

All changes in stockholders’ equity during a period, except those resulting from dividends and stockholders’ investments.

Interest Receivable

The amount of interest that has been earned but not yet received in cash or other forms of payment.

Interest Revenue

Income earned from lending money or investing in interest-bearing financial instruments.