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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, 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% $ 69,000 $ 69,000 0 0 2 Situation 8 10% $369,000 $369,000 $ 69,000 0 3 6 8% $94,000 $ 64,000 $ 26,000 $ 26,000 4 9 11% $ 484,000 $ 484,000 $ 38,000 $ 43,000 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

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% $ 69,000 $ 69,000 0 0 2 Situation 8 10% $369,000 $369,000 $ 69,000 0 3 6 8% $94,000 $ 64,000 $ 26,000 $ 26,000 4 9 11% $ 484,000 $ 484,000 $ 38,000 $ 43,000 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

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, 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 Lease Payments $ 16,274 1 $ $ $ 5 9% $ 69,000 $ 69,000 0 0 0 $ 0 0 Residual Value PV of Lease Guarantee Payments 2 Situation $369,000 $ 369,000 $ 69,000 0 69,000 8 10% 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. 3 $ $ $ $ 94,000 $ 64,000 6 8% $ 26,000 $ 26,000 PV of Residual Value Guarantee 0 0 0 4 $ 9 11% $ 484,000 $ 484,000 $ 38,000 $ 43,000 Right-of-use Asset/Lease Liability 69,000
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 Lease Payments $ 16,274 1 $ $ $ 5 9% $ 69,000 $ 69,000 0 0 0 $ 0 0 Residual Value PV of Lease Guarantee Payments 2 Situation $369,000 $ 369,000 $ 69,000 0 69,000 8 10% 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. 3 $ $ $ $ 94,000 $ 64,000 6 8% $ 26,000 $ 26,000 PV of Residual Value Guarantee 0 0 0 4 $ 9 11% $ 484,000 $ 484,000 $ 38,000 $ 43,000 Right-of-use Asset/Lease Liability 69,000
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