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At the inception of a lease, lessors present assets held under a finance lease as a receivable. The value of the receivable is calculated as the present value of: Unguaranteed residual values(among other things…).
Sir what are these unguaranteed residual values?
At the end of the asset life the lessor will sell it.
Residual value = expected sales proceeds.
Sometimes lessee promises to pay some money to lessee (if, for example, they have damaged the asset). This would be ‘guaranteed residual value’ – anything else would be ‘unguaranteed’.