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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. EVA 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 Situation 2 3 10% 7 11% 5 9% 8 12% $ 50,000 $ 350,000 Lessor's cost of lease asset $ 50,000 $ 350,000 $ 75,000 $ 45,000 $ 465,000 $ 465,000 Residual value: $ 50,000 $ 7,000 $ 45,000 0 $ 7,000 $ 50,000 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.

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. EVA 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 Situation 2 3 10% 7 11% 5 9% 8 12% $ 50,000 $ 350,000 Lessor's cost of lease asset $ 50,000 $ 350,000 $ 75,000 $ 45,000 $ 465,000 $ 465,000 Residual value: $ 50,000 $ 7,000 $ 45,000 0 $ 7,000 $ 50,000 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.

FINANCIAL ACCOUNTING
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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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, EVA of $1. PVA of $1. EVAD of $1 and PVAD of $1) Situation 2 3 4 Lease term (years) Lessor's rate of return Fair value of lease asset 4 10% 7 11% 5 19% 8 12% $ 50,000 $ 350,000 $ 75,000 Lessor's cost of lease asset $ 50,000 $ 350,000 $ 45,000 $ 465,000 $ 465,000 Residual value: Estimated fair value 0 $ 50,000 $ 7,000 $ 45,000 Guaranteed fair value 0 0 $ 7,000 $ 50,000 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. Lease Payments Residual Value Guarantee PV of Lease Payments PV of Residual Value Guarantee Right-of-use Asset/Lease Liability Situation 1 $ 14,340 $ 50,000 Situation 2 $ 62,310 $ 325,917 Situation 3 Situation 4
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, EVA of $1. PVA of $1. EVAD of $1 and PVAD of $1) Situation 2 3 4 Lease term (years) Lessor's rate of return Fair value of lease asset 4 10% 7 11% 5 19% 8 12% $ 50,000 $ 350,000 $ 75,000 Lessor's cost of lease asset $ 50,000 $ 350,000 $ 45,000 $ 465,000 $ 465,000 Residual value: Estimated fair value 0 $ 50,000 $ 7,000 $ 45,000 Guaranteed fair value 0 0 $ 7,000 $ 50,000 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. Lease Payments Residual Value Guarantee PV of Lease Payments PV of Residual Value Guarantee Right-of-use Asset/Lease Liability Situation 1 $ 14,340 $ 50,000 Situation 2 $ 62,310 $ 325,917 Situation 3 Situation 4
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