If a Capital Lease Has a Guaranteed Residual Value, How

Multiple Choice

If a capital lease has a guaranteed residual value, how should the lessee account for it at the inception of the lease?

A) The initial asset and liability should be increased by the present value of the residual value.
B) The initial asset and liability should be increased by the amount of the residual value.
C) The initial asset and liability should be decreased by the present value of the residual value.
D) The initial asset and liability should be decreased by the amount of the residual value.