If instead of an unguaranteed residual value, there is a purchase option which is so low that it is expected Lessee will exercise it thenLessee adds the present value of the option as an additional payment to be made, but Lessor does not add it into the receivable.Both parties add in the present value of the option to the liability or receivable.Lessor adds the present value of the option as an additional payment to be received, but Lessee does not add it into the liability.Neither party considers the present value of the option for the liability or receivable.

As per IAS 17 "Leases " , if the lessee has an option to purchase the asset at a price which is…

Answered: If instead of an unguaranteed residual…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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If instead of an unguaranteed residual value, there is a purchase option which is so low that it is expected Lessee will exercise it then

Lessee adds the present value of the option as an additional payment to be made, but Lessor does not add it into the receivable.
Both parties add in the present value of the option to the liability or receivable.
Lessor adds the present value of the option as an additional payment to be received, but Lessee does not add it into the liability.
Neither party considers the present value of the option for the liability or receivable.

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