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
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
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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