Use asset and lease liability under residual value guarantee

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Reference no: EM131520664

On January 1, Garcia Supply leased a truck for a four-year period, at which time possession of the truck will revert back to the lessor. Annual lease payments are $17,500 due on December 31 of each year, calculated by the lessor using a 5% discount rate. Negotiations led to Garcia guaranteeing a $66,600 residual value at the end of the lease term. Garcia estimates that the residual value after four years will be $65,200. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) What is the amount to be added to the right-of-use asset and lease liability under the residual value guarantee?

Reference no: EM131520664

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