Exercise 15-24 (Algo) Calculation of annual lease payments; residual value [LO15-2, 15-6]Each of the four independent situations below describes a finance lease in which annual lease payments are payable at the beginningof 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 $1)Lease term (years)Lessor's rate of returnFair value of lease assetLessor's cost of lease assetResidual value:Estimated fair valueGuaranteed fair valueSituation 1Situation 2Situation 3Situation 41Lease Payments10%$ 53,000$ 53,000002Situation811%$ 353,000$ 353,000Residual Value PV of LeaseGuaranteePayments$ 53,0000369%$ 78,000$ 48,000$ 10,000$ 10,000PV of ResidualValue Guarantee4Required:a. & b. Determine the amount of the annual lease payments as calculated by the lessor and the amount the lessee would record as aright-of-use asset and a lease liability, for each of the above situations.Note: Round your answers to the nearest whole dollar amount.912%$ 468,000$ 468,000$ 48,000$ 53,000Right-of-useAsset/LeaseLiability

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 10% $ 53,000 $ 53,000 0 0 2 Situation 8 118 $ 353,000 $ 353,000 $ 53,000 0 3 6 98 $ 78,000 $ 48,000 $ 10,000 $ 10,000 4 9 128 $ 468,000 $ 468,000 $ 48,000 $ 53,000

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 10% $ 53,000 $ 53,000 0 0 2 Situation 8 118 $ 353,000 $ 353,000 $ 53,000 0 3 6 98 $ 78,000 $ 48,000 $ 10,000 $ 10,000 4 9 128 $ 468,000 $ 468,000 $ 48,000 $ 53,000

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 sales-type lease in which annual lease payments a at the beginning of each year. Each is a finance lease for the lessee. (FV of $1, PV of $1, FVA of $1, PVA of $1, $1) (Use appropriate factor(s) from the tables provided.) Situation 1 2 3 Lease term (years) 7 7 8 Lessor's and lessee's interest rate Residual value: 8 128 98 11% 10% Estimated fair value 0 $50,000 $8,000 $50,000 Guaranteed by lessee 0 0 $8,000 $60,000 Determine the following amounts at the beginning of the lease. (Round your intermediate and final answers dollar amount.) Situation 2 A The lessor's: 1. Lease payments 2. Gross investment in the lease 3. Net investment in the lease The lessee's: 4. Lease payments 5. Right-of-use asset 6. Lease payable B
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