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Why is the residual value on an operating lease type asset the negative total interest ?
I have set up an Operating lease and right of use asset in my sandbox.
For the right of use asset the residual value is the negative total interest.
The PV of my lease payments is $3,938,963.88/60 (life of lease)= $65649.39
However my right of use asset depreciation schedule has:
$71,142.71 X60 = $4,268,562.60
The difference is the total interest on the operating lease, $329,598.60
I have been asked by our financial statement auditors why the amortization of the right of use asset is not the straight line of the PV of the lease payments.
The research I have found in netsuite confirms the residual value of the right of use asset is the negative total interest:
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