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) 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 1 5 9% $ 62,000 $ 62,000 0 0 2 Situation 8 10% $362,000 $362,000 $ 62,000 0 3 6 8% $ 87,000 $ 57,000 $ 19,000 $ 19,000 4 9 11% $ 477,000 $ 477,000 $ 31,000 $ 36,000
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) 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 1 5 9% $ 62,000 $ 62,000 0 0 2 Situation 8 10% $362,000 $362,000 $ 62,000 0 3 6 8% $ 87,000 $ 57,000 $ 19,000 $ 19,000 4 9 11% $ 477,000 $ 477,000 $ 31,000 $ 36,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD 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
5
9%
$ 62,000
$ 62,000
0
0
2
Situation
8
10%
$362,000
$362,000
Residual Value PV of Lease
Guarantee Payments
$ 62,000
0
3
6
8%
$ 87,000
$ 57,000
$ 19,000
$ 19,000
PV of Residual
Value Guarantee
4
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.
9
11%
$ 477,000
$ 477,000
$ 31,000
$ 36,000
Right-of-use
Asset/Lease
Liability
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