If the Residual Value of a Leased Asset Turns Out

question 43

Multiple Choice

If the residual value of a leased asset turns out to be more than the amount guaranteed by the lessee, the:

• A) Lessor must compensate the lessee for the excess.
• B) Lessee must pay the lessor the amount of the excess.
• C) Lessee will reduce the last year's depreciation.
• D) Lessor is not obligated to compensate the lessee for the excess.

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Definitions:

Cash Dividends

Payments made by a corporation to its shareholders from its profit.

Equity Method

An accounting technique used to record investments in other companies by recognizing income and changes in value in proportion to ownership.

Wendell's Share

An unspecified term that may refer to the portion or percentage of ownership, profits, or assets attributed to an individual named Wendell.

Net Income Earned

The total earnings of a company after all expenses and taxes have been deducted from total revenues, essentially the same as Net Income but emphasizing the acquisition aspect.