Question

If the residual value of a leased asset is guaranteed by a third party:________.
A. it is treated by the lessee as no residual value.
B. the third party is also liable for any lease payments not paid by the lessee.
C. the net investment to be recovered by the lessor is reduced.
D. it is treated by the lessee as an additional payment and by the lessor as realized at the end of the lease term.

Answer 1

Answer:

A. it is treated by the lessee as no residual value.

Explanation:

If the expected residual value is in assurance or unguaranteed, that's the economic and accounting product of the lesses

Furthermore, the guaranteed residual value also affects the computation of the minimum lease payment and the capitalised amount for an asset i.e. leased, lease obligation for the lessee

The promised residual value is an extra lease payment that can be paid in real estate or in cash, or both

Although the unguaranteed residual value, on the other hand, stays the same because no residual value will be impacted with respect to the estimation of the total lease payment and the capitalised amount for an asset, i.e. rented, lease contract.