Which of the following statements concerning guaranteed residual values is appropriate for the lessee?
A) The asset and related liability should be increased by the amount of the residual value.
B) The asset and related liability should be decreased by the amount of the residual value.
C) The asset and related liability should be decreased by the present value of the residual value.
D) The asset and related liability should be increased by the present value of the residual value.

Question

Quizplus · Accepted Answer

The correct approach for accounting for guaranteed residual values by the lessee under a lease agreement is to include the present value of the guaranteed residual value in both the asset and liability recognized on the balance sheet. This reflects the lessee's obligation to ensure the asset's value at the end of the lease term and the right to use the asset over the lease term.

Which of the Following Statements Concerning Guaranteed Residual Values Is