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What does guaranteed residual value mean in terms of leasing? How does it affect calculating depreciation...

What does guaranteed residual value mean in terms of leasing? How does it affect calculating depreciation on lease assets?

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guaranteed residual value

The financial accounting term guaranteed residual value refers to an additional payment made by a lessee in property, cash, or both when a lease terminates. Guaranteed residual values are financial commitments made by the lessee, and factor into the calculation of the minimum lease payment.

affect in calculating depreciation on lease assets

calculating depreciation of a leased asset, the lessee should subtract guaranteed residual value and depreciate over the economic life of the asset.The lessee takes into consideration the guaranteed salvage value when calculating depreciation expense associated with a capital lease.

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