A Guaranteed Residual Value at the Inception of a Capital

question 113

Multiple Choice

A guaranteed residual value at the inception of a capital lease should be:

• A)Excluded from minimum lease payments.
• B)Included as part of minimum lease payments at present value.
• C)Included as part of minimum lease payments at future value.
• D)Included as part of minimum lease payments only to the extent that guaranteed residual value is expected to exceed estimated residual value.

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Definitions:

Chattel Paper

A document or electronic record indicating both a monetary obligation and a security interest in or a lease of specific goods.

Monetary Obligation

A required payment of money owed by one party to another, typically defined by the terms of a contract or agreement.

Security Interest

A legal claim or lien on collateral or property, given by the borrower to the lender, to secure repayment of a loan.

Purchase-Money Security Interest

A legal claim that allows a lender to repossess or foreclose on property financed through debt if the borrower defaults, specifically relating to the item purchased.