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What is the meaning of guaranteed and guaranteed residual value?. How does the lessor accounts such amounts in his books?
Further, does minimum lease rentals include guaranteed residual value?
Hi,
A guaranteed residual value is saying that the asset has to be worth this amount at the end of the lease, regardless of the condition it is returned in. So if it is in a worse condition than the guaranteed residual value then the lessee will have to make up the amounts.
The lessor will recognise the lease at the present value of the lease payments and the unguaranteed residual value.
Thanks
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