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Asset and lease liability under the residual value guarantee

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1.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?

Reference no: EM13880453

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