If the Residual Value of a Leased Asset Is Greater

question 78

Multiple Choice

If the residual value of a leased asset is greater than the amount guaranteed by the lessee,the lessee

• A) pays the lessor for the difference
• B) recognizes a gain at the end of the lease term.
• C) has no obligation related to the residual value.
• D) pays the lessor for the difference.

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Definitions:

Straight-Line Method

A method of calculating depreciation of an asset, which assumes the asset will lose an equal amount of value each year over its useful life.

Discount on Bonds Payable

Discount on bonds payable represents the difference between the face value of a bond and its selling price, when the bond is sold for less than its face value.

Premium on Bonds Payable

The excess of a bond's selling price over its principal amount.

Debenture Bonds

Fixed-interest unsecured loans issued by companies, backed only by the creditworthiness and reputation of the issuer, rather than by a lien on any specific asset.