When the Lessee Guarantees the Residual Value at the End

question 174

Multiple Choice

When the lessee guarantees the residual value at the end of the lease term,the:

• A) lessor will use this amount in computing periodic depreciation expense.
• B) lessor will receive an additional cash flow at the end of the lease term.
• C) lessee may have to pay the lessor additional cash if the actual residual value is not equal to the estimated residual value.
• D) lessee will have to pay the lessor additional cash because the guaranteed residual value was included in computing the annual rental amounts.

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Definitions:

Expenses

Money spent or cost incurred in an organization's efforts to generate revenue, representing the cost of doing business.

Miscellaneous Expense

Minor or incidental expenses that do not fit into other specific categories within an organization's financial accounting.

Adjusted Trial Balance

A list of all accounts and their adjusted balances after journal errors have been corrected and adjustment entries made, used to prepare financial statements.