Non guaranteed residual value

Reference no: EM1349526

Finance Here Sales and Service provides lease-based financing for its full line of commercial generators. Sales of the generators are properly accounted for as operating sales-type (finance) leases. Terms of the leases include return of the generators to Finance Here Sales and Service for resale in secondary markets. The company estimates that the non-guaranteed residual value on generators are equal to an average of 10 percent of the historical cost of the generators. Finance Here Sales and Service can expect that:

A. Cost of goods sold will be equal to the historical cost of the generators sold.
B. Cost of goods sold will be greater than the historical cost of the generators sold.
C. Cost of goods sold will be less than the historical cost of the generators sold.
D. The relationship of costs of goods sold and the historical cost of the generators cannot be determined.

Reference no: EM1349526

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