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 4 10% Lease Payments $ 66,000 $ 66,000 0 0 2 Situation 7 11% $366,000 $366,000 Residual Value PV of Lease Guarantee Payments $ 66,000 0 3 5 9% $ 91,000 $ 61,000 $ 23,000 $ 23,000 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 8 12% $ 481,000 $ 481,000 $ 35,000 $ 40,000 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. (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 4 10% Lease Payments $ 66,000 $ 66,000 0 0 2 Situation 7 11% $366,000 $366,000 Residual Value PV of Lease Guarantee Payments $ 66,000 0 3 5 9% $ 91,000 $ 61,000 $ 23,000 $ 23,000 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 8 12% $ 481,000 $ 481,000 $ 35,000 $ 40,000 Right-of-use Asset/Lease Liability
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
4
10%
Lease Payments
$ 66,000
$ 66,000
0
0
2
Situation
7
11%
$ 366,000
$366,000
$ 66,000
0
Residual Value PV of Lease
Guarantee Payments
3
5
9%
$ 91,000
$ 61,000
$ 23,000
$ 23,000
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
8
12%
$ 481,000
$ 481,000
$ 35,000
$ 40,000
Right-of-use
Asset/Lease
Liability
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