When Lessors Account for Residual Values Related to Leased Assets

question 97

Multiple Choice

When lessors account for residual values related to leased assets, they

• A) include the residual value because they always assume the residual value will be realized.
• B) include the unguaranteed residual value in sales revenue.
• C) recognize more gross profit on a sales-type lease with a guaranteed residual value than on a sales-type lease with an unguaranteed residual value.
• D) All of the answers are true with regard to lessors and residual values.

---

Definitions:

Financial Statement

A comprehensive report detailing a company's financial performance, position, and cash flows over a specific period.

Credit Terms

Conditions under which credit is extended by a lender to a borrower, detailing the repayment time frame, interest rate, and other conditions of the credit agreement.

Merchandise

Goods bought for resale in the course of business, typically in a retail or wholesale establishment.

Payments

The act of transferring money in exchange for goods or services, or to settle debts.