CFA Practice Question

There are 520 practice questions for this study session.

CFA Practice Question

A lease contains a guaranteed residual value (guaranteed by the lessee). How would this amount be treated in determining the amount the lessee capitalizes?
A. The amount would be deducted.
B. The present value of the amount would be added.
C. The present value of the amount would be deducted.
Explanation: The present value of guaranteed amounts should be included in the amount capitalized.

User Contributed Comments 4

User Comment
shasha said it's guaranteed OR unguaranteed, both should be included. remember the answer to some other question says so.
gjwhite See footnote 2 on page 536 of White, Sondhi and Fried: " MLPs include residual values when they are guaranteed by the lessees...and effectively transfers the risk of changes in residual values to the lessee."
CoffeeGirl so lessee give guaranteed residual value to lessor, this "residual value" is included in the lease asset.
cfastudypl eliminate the deducted as they both have the same direction and added becomes the correct option.
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