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 $1)Situation1234Lease term (years)Lessor's rate of returnFair value of lease asset410%711%59%812%$ 64,000$ 364,000$ 89,000Lessor's cost of lease asset$ 64,000$ 364,000$ 59,000$ 479,000$ 479,000Residual value:Estimated fair value0$ 64,000$ 21,000$ 33,000Guaranteed fair value00$ 21,000$ 38,000Required: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.Right-of-useLease PaymentsResidual ValueGuaranteePV of LeasePaymentsPV of ResidualValue GuaranteeAsset/LeaseLiabilitySituation 1$15,773$50,000Situation 2Situation 3Situation 4

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) Situation 2 3 Lease term (years) Lessor's rate of return Fair value of lease asset 4 10% 7 11% 5 8 9% 12% $ 64,000 Lessor's cost of lease asset $ 64,000 $ 364,000 $ 364,000 $ 89,000 $ 59,000 $ 479,000 $ 479,000 Residual value: Estimated fair value $ 64,000 $ 21,000 $ 33,000 Guaranteed fair value 0 0 $ 21,000 $ 38,000 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.

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) Situation 2 3 Lease term (years) Lessor's rate of return Fair value of lease asset 4 10% 7 11% 5 8 9% 12% $ 64,000 Lessor's cost of lease asset $ 64,000 $ 364,000 $ 364,000 $ 89,000 $ 59,000 $ 479,000 $ 479,000 Residual value: Estimated fair value $ 64,000 $ 21,000 $ 33,000 Guaranteed fair value 0 0 $ 21,000 $ 38,000 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.

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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Part 1: New Lease Accounting – IFRS 16 Leases Effect Analysis. What are the top three industries most affected by IFRS 16 as measured by the present value of future payments for off-balance-sheet leases to total assets? Which leased assets propel them to the top three? Also, discuss the extent that smaller firms would be affected by IFRS 16. Which payments are to be included in the measurement of lease assets and lease liabilities? Also, discuss the pros and cons of excluding the following payments from the measurement. Variable lease payments linked to future use or sales Optional payments relating to lease-extension option when a lessee is not reasonably certain to exercise the option. Discuss the effects of the new accounting on the following items and ratios of lessees. Provide reason(s) behind all effects. EBITDA, operating profit, and profit before tax Operating cash flow, financing cash flow, and total cash flow Debt to equity, current ratio, and return on total assets
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What is the proper accounting treatment to record a variable lease payment indexed off the CPI? Group of answer choices Record the lease liability based on highest annual increase in the CPI for the past 10 years. Calculate the lease liability based on the base payment and debit an additional expense in subsequent years based on the change in the CPI. Calculate the lease liability based on expected payments over the life of the lease after considering increases in the CPI. Capitalize and depreciate the increased payments based on CPI indexing.
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Each of the three 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 (known by lessee) Lessee's incremental borrowing rate Fair value of lease asset Situation 11 Situation 2 Situation 3 Lease Payments 10 11% 12% Right-of-use Asset/Lease Payable $780,000 Situation 20 9% 10% $1,150,000 3 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. 6 12% 11% $365,000
For which of the following conditions will the lessor classify a lease as a sales-type lease? a.The leased asset may be exchanged for a similar asset during the lease term. b.The present value of the sum of the lease payments is equal to or more than the fair value of the underlying asset. c.The lease term is less than one year. d.The lease term is half of the underlying asset’s economic life.
Each of the three independent situations below describes a finance lease in which annual lease payments are payable at the end 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 (known by lessee) Lessee's incremental borrowing rate Fair value of lease asset Situation 1 Situation 2 Situation 3 Lease Payments Right-of-use Asset/Lease 1 Payable 10 10% 11% $780,000 Situation 2 15 8% 9% $1,070,000 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. 3 5 11% 10% $275,000
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The rent expense of the lessee maybe composed of the following:I. Straight-line amortization of total rental payments over the lease term plus any free rent.II. Straight-line amortization of lease bonus paid by the lessee at inception of the lease.III. Any contingent rent accrued to the lessor as part of lease agreement. Group of answer choices I and III only II and III only I and II only I, II, and III