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. (EV of $1. PV of $1. EVA of $1. PVA of $1. EVAD of $1 and PVAD of $1) Lease term (years) Lessor's rate of return. Fair value of lease asset Lessor's cost of lease asset Residual value: Estimated fair value Guaranteed fair value. Situation 1 Situation 2 Situation 3 Situation 4 1 Lease Payments 6 10% $50,000 $50,000 0 2 Situation 9 11% $ 358,000 $ 358,000 $ 55,000 0 Residual Value PV of Lease Guarantee Payments 7 9% $ 83,000 $ 53,000 $ 15,000 $15,000 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. PV of Residual Value Guarantee 10 12% $ 473,000 $ 473,000 $ 30,000 $ 35,000 Right-of-use Asset/Lease Liability
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. (EV of $1. PV of $1. EVA of $1. PVA of $1. EVAD of $1 and PVAD of $1) Lease term (years) Lessor's rate of return. Fair value of lease asset Lessor's cost of lease asset Residual value: Estimated fair value Guaranteed fair value. Situation 1 Situation 2 Situation 3 Situation 4 1 Lease Payments 6 10% $50,000 $50,000 0 2 Situation 9 11% $ 358,000 $ 358,000 $ 55,000 0 Residual Value PV of Lease Guarantee Payments 7 9% $ 83,000 $ 53,000 $ 15,000 $15,000 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. PV of Residual Value Guarantee 10 12% $ 473,000 $ 473,000 $ 30,000 $ 35,000 Right-of-use Asset/Lease Liability
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text: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. (EV of $1. PV of $1. EVA of S1, PVA of $1. EVAD of $1 and PVAD of $1)
Lease term (years)
Lessor's rate of return
Fair value of lease asset
Lessor's cost of lease asset
Residual value:
Estimated fair value.
Guaranteed fair value
Situation 1
Situation 2
Situation 3
Situation 4
1
Lease Payments
6
10%
$ 58,000
$ 58,000
e
0
2
Situation
9
11%
$ 358,000
$ 358,000
$ 58,000
Residual Value PV of Lease
Guarantee Payments
0
7
9%
$ 83,000
$ 53,000
$ 15,000
$ 15,000
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.
PV of Residual
Value Guarantee
4
10
12%
$ 473,000
$ 473,000
$ 30,000
$ 35,000
Right-of-use
Asset/Lease
Liability
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