Explain why the residual value is ignored in the computation of annual rental if the underlying asset will not revert to the lessor at the end of lease term?

What is the method in recognizing interest income in a direct financing lease?

Explain the "trial and error" or interpolation approach of determining the implicit interest rate if an initial direct cost is paid by the lessor in a direct financing lease.

Explain the presentation of the lease receivable in the statement of financial position.

Explain why an original owner may enter into a sale and leaseback transaction.

What is the important consideration in accounting for sale and leaseback transaction?

Answer rating: 100% (QA)

Solution Ans 1Unguaranteed residual value accruing to the lessor is not included in lease payments but is added to the net investment in the lease It is that portion of the residual value of the under... View the full answer