If the residual value of a leased asset turns out to be more than the amount guaranteed by the lessee, the:
A)lessor must pay the lessee the amount of the excess.
B)lessee may reduce depreciation expense for the prior year, through a prior period adjustment, to take into account the excess.
C)lessor is under no obligation to compensate the lessee for the excess.
D)lessee may reduce the annual rentals for the excess.

Question

Quizplus · Accepted Answer

When the residual value of a leased asset is more than the amount guaranteed by the lessee, the lessor is not required to compensate the lessee for the excess. The agreement between the lessee and lessor typically outlines the responsibilities regarding the residual value, and there is no standard requirement for the lessor to pay the lessee if the actual residual value exceeds the guaranteed amount.

If the Residual Value of a Leased Asset Turns Out