When the Lessee Guarantees the Residual Value at the End

question 77

Multiple Choice

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

• A) annual rentals will always be more than they would have been if the residual value was not guaranteed.
• B) guaranteed residual value does not affect the annual rentals because it is a cash flow at the end of the lease term.
• C) annual rentals will be the same as they would have been if the residual value was not guaranteed.
• D) annual rentals will always be less than they would have been if the residual value was not guaranteed.

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Definitions:

Bounded Rationality

A concept suggesting that decision-making is limited by the information available, cognitive limitations of the mind, and the finite amount of time available to make a decision.

Herbert Simon

An American economist and cognitive psychologist known for his research in the fields of decision-making and problem-solving, notably the concept of bounded rationality.

Behavioural Economic Theory

An approach combining psychological insights with economic theory to predict and understand human decision-making.

Ideal Goals

Objectives or aims that represent a perfect or most desirable outcome, often used as benchmarks for success or aspiration.