Question

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 $10,000 due on December 31 of each year, calculated by the lessor using a 5% discount rate. Negotiations led to Garcia guaranteeing a $36,000 residual value at the end of the lease term. Garcia estimates that the residual value after four years will be $35,000. What is the amount to be added to the right-of-use asset and lease liability under the residual value guarantee

Answer 1

Following are the response to the given choice.

Step-by-step explanation:

A residual value guaranteed 36000

Less: Residual value expected 35000

Difference 1000

5%, 5 periods PV Factor 0.7835

PV of the amount added $784

Added Amount = $784