Occasionally, a Lease Agreement Includes a Guarantee by the Lessee

question 103

Essay

Occasionally, a lease agreement includes a guarantee by the lessee that the lessor will recover a specified residual value when custody of the asset reverts back to the lessor at the end of the lease term. Under what circumstance can the guaranteed residual value influence the amounts recorded by the lessee and lessor? In that circumstance, how are the amounts affected?

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Definitions:

Centriole

In animal cells, a barrel-shaped organelle from which microtubules grow.

Cilia

Microscopic, hair-like structures on the surface of certain cells that move in a wave-like manner, facilitating movement or the transport of fluids and particles.

Vesicle

A small, fluid-filled sac or cyst within the body or a cell, used to transport materials within the cytoplasm.

Membrane Enclosed Sac

A structure within a cell, bounded by lipids, that contains fluid or smaller organelles, involved in transport, storage, and processing.