Each of the four independent situations below describes a finance lease in which annual lease payments are payable at the beginningof each year. The lessee is aware of the lessor's implicit rate of return.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 $1)Situation1234Lease term (years)Lessor's rate of return410%711%589%12%Fair value of lease asset$ 64,000$ 364,000$ 89,000Lessor's cost of lease asset$ 64,000$ 364,000$ 59,000$ 479,000$479,0000$ 64,000$ 21,000$ 33,00000$ 21,000$ 38,000Residual value:Estimated fair valueGuaranteed fair valueRequired:a. & b. Determine the amount of the annual lease payments as calculated by the lessor and the amount the lessee would record as aright-of-use asset and a lease liability, for each of the above situations.Note: Round your answers to the nearest whole dollar amount.Right-of-useLease PaymentsResidual ValueGuaranteePV of LeasePaymentsPV of ResidualValue GuaranteeAsset/LeaseLiabilitySituation 1Situation 2$18,355 $0 $64,000 $0 $64,000$0$0Situation 3$0$0Situation 4

A lease is a contractual agreement entered between two parties where one provides an asset for use…

a. & b. Determine the amount of the annual lease payments as calculated by the lessor and the amount the lessee would record as a right-of-use asset and a lease liability, for each of the above situations.

a. & b. Determine the amount of the annual lease payments as calculated by the lessor and the amount the lessee would record as a right-of-use asset and a lease liability, for each of the above situations.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Leasing

Leasing is a contractual arrangement in which someone (a lessee) pays the owner (or lessor) of a building, land, vehicle, or other asset for the use of that asset. The lease is the agreement between lessee and lessor.

Question

Each of the four independent situations below describes a finance lease in which annual lease payments are payable at the beginning
of each year. The lessee is aware of the lessor's implicit rate of return.
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)
Situation
1
2
3
4
Lease term (years)
Lessor's rate of return
4
10%
7
11%
5
8
9%
12%
Fair value of lease asset
$ 64,000
$ 364,000
$ 89,000
Lessor's cost of lease asset
$ 64,000
$ 364,000
$ 59,000
$ 479,000
$479,000
0
$ 64,000
$ 21,000
$ 33,000
0
0
$ 21,000
$ 38,000
Residual value:
Estimated fair value
Guaranteed fair value
Required:
a. & b. Determine the amount of the annual lease payments as calculated by the lessor and the amount the lessee would record as a
right-of-use asset and a lease liability, for each of the above situations.
Note: Round your answers to the nearest whole dollar amount.
Right-of-use
Lease Payments
Residual Value
Guarantee
PV of Lease
Payments
PV of Residual
Value Guarantee
Asset/Lease
Liability
Situation 1
Situation 2
$
18,355 $
0 $
64,000 $
0 $
64,000
$
0
$
0
Situation 3
$
0
$
0
Situation 4

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Please give answer of this question
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