Reference no: EM132731088

Problem 1: Which one is the correct description?

a) Residual value is the expected value of the leased asset at the end of the lease term.

b) A guaranteed residual value is a guarantee made to a lessor that the value of the leased asset returned to the lessor at the end of a lease will be at least a specified amount. Any amounts probable to be paid under the residual value guarantee should be included in the present value of payments.

c) Initial direct costs are incremental costs of a lease that would not have been incurred had the lease not been executed. Initial direct costs incurred by the lessee are included in the cost of the right-of-use asset but are not recorded as part of the lease liability.

d) All of above