884 xercises + - E 15-1 Lease classification • LO15-1 Each of the four independent situations below describes a lease requiring annual lease payments of $10,000. For each situation, determine the appropriate lease classification by the lessee and indicate why. Situatlon 2 3 Lease term (years) Asset's useful life (years) Asset's fair value 4 6 $44,000 $45,000 $41,000 $38,000 Purchase option that is reasonably certain to be exercised? Annual lease payments Lessor's implicit rate (known b lessee) Lessee's incremental borrowing rate No Yes No No Beg. of yr. End of yr. Beg. of yr. 5% End of yr. 5% 5% 6% 6% 5% 5% 5% E 15-2 Finon
884 xercises + - E 15-1 Lease classification • LO15-1 Each of the four independent situations below describes a lease requiring annual lease payments of $10,000. For each situation, determine the appropriate lease classification by the lessee and indicate why. Situatlon 2 3 Lease term (years) Asset's useful life (years) Asset's fair value 4 6 $44,000 $45,000 $41,000 $38,000 Purchase option that is reasonably certain to be exercised? Annual lease payments Lessor's implicit rate (known b lessee) Lessee's incremental borrowing rate No Yes No No Beg. of yr. End of yr. Beg. of yr. 5% End of yr. 5% 5% 6% 6% 5% 5% 5% E 15-2 Finon
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:884
xercises
+ -
E 15–1
Lease classification
• LO15-1
Each of the four independent situations below describes a lease requiring annual lease payments of $10,000. For each situation,
determine the appropriate lease classification by the lessee and indicate why.
Situatlon
1
2
3
4
Lease term (years)
Asset's useful life (years)
4
6
6
Asset's fair value
$44,000
$45,000
$41,000
$38,000
Purchase option that is reasonably
certain to be exercised?
Annual lease payments
Lessor's implicit rate (known b lessee)
Lessee's incremental borrowing rate
No
Yes
No
No
Beg. of yr.
End of yr.
Beg. of yr.
End of yr.
5%
5%
6%
5%
6%
5%
5%
5%
E 15-2
Finon
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