Quick Question F5

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  • #188402
    MattCPA18
    Member

    I just have a quick question that I just can’t seem to find the answer for in the book. When trying to determine the lease liability at the beginning of the lease, how do you know whether to use the present value of the bargain purchase option or the present value of the guaranteed residual value? The pass key on F5-14 says Bargain purchase OR Residual. I just don’t see where it says anywhere how to choose which one. Please and thank you!!

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  • #596695
    jstay
    Participant

    pretty sure its if both the bargain purchase and guaranteed residual value are present they are included in the present value of the payment. look on page F5-13- it says include required payments, guaranteed residual, and bargain purchase option.

    #596696
    MattCPA18
    Member

    yea thats what i originally thought….take a look at question 23 in F5 for accounting for leases…..it lists both a bargain purchase and a residual….unless that residual that is listed isn't guaranteed??

    #596697
    jstay
    Participant

    yeah thats probably the case, its probably not guaranteed. whats the explanation say? does the question specifically guaranteed residual value?

    #596698
    jstay
    Participant
    #596699
    MattCPA18
    Member

    perfect…thanks!!

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