4. Total lease payments 1,110,000 1,110,000 1,295,000 1,295,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Gadubhai

Transcribed Image Text:Each of the four independent situations below describes a sales-type lease in which annual lease payments of $185,000 are payable
at the beginning of each year. Each is a finance lease for the lessee.
Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
Lease term (years)
Lessor's and lessee's interest rate
Residual value:
Estimated fair value
Guaranteed by lessee
A. The lessor's:
1. Total lease payments
2. Gross investment in the
lease
3. Net investment in the lease
B. The lessee's:
4. Total lease payments
5. Right-of-use asset
6. Lease liability
$
1
1,110,000
1,110,000
904,585✔
1,110,000
904,585
904,585
2
1
$0
$0
6
9%
Determine the following amounts at the beginning of the lease.
Note: Round your intermediate and final answers to the nearest whole dollar amount.
Answer is complete but not entirely correct.
$ 1,110,000
1,177,000
904,562
Situation
1,110,000
868,741
3
2
Situation
$ 67,000
$0
$ 1,295,000
6
11%
1,295,000
990,723
868,741✔ 990,723
$
3
4
$ 9,700
$ 9,700
1,295,000
1,304,700
1,372,000
995,701✔ 980,442 ✔
7
10%
1,295,000 X
950,134✔
950,134
4
7
12%
$ 67,000
$ 77,000
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