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 $ $ $ 1 4 10% $ 60,000 $ 60,000 17,207 $ 63,301 $ $ 17,442 $ 0 0 0 $ 0 $ 0 $ 5,000 Residual Value PV of Lease Guarantee Payments 2 Situation $360,000 $360,000 7 11% $ 60,000 0 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 amount. 60,000 $ 331,100 $ 73,951 $ $ $ 85,000 $ 55,000 5 9% $ 17,000 $ 17,000 PV of Residual Value Guarantee 0 0 0 2,019 4 $ $ $ 8 12% $ 475,000 $ 475,000 $ 29,000 $ 34,000 Right-of-use Asset/Lease Liability 60,000 331,100 73,951
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 $ $ $ 1 4 10% $ 60,000 $ 60,000 17,207 $ 63,301 $ $ 17,442 $ 0 0 0 $ 0 $ 0 $ 5,000 Residual Value PV of Lease Guarantee Payments 2 Situation $360,000 $360,000 7 11% $ 60,000 0 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 amount. 60,000 $ 331,100 $ 73,951 $ $ $ 85,000 $ 55,000 5 9% $ 17,000 $ 17,000 PV of Residual Value Guarantee 0 0 0 2,019 4 $ $ $ 8 12% $ 475,000 $ 475,000 $ 29,000 $ 34,000 Right-of-use Asset/Lease Liability 60,000 331,100 73,951
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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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
$
$
$
17,207
63,301
17,442
1
4
10%
$ 60,000
$ 60,000
$
$
$
$
0
0
0 $
0 $
0 $
5,000
Residual Value PV of Lease
Guarantee Payments
2
Situation
$360,000
$360,000
7
11%
$ 60,000
0
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
60,000 $
331,100 $
73,951 $
$
$ 85,000
$ 55,000
5
9%
$ 17,000
$ 17,000
PV of Residual
Value Guarantee
0
0
0
2,019
4
$
$
$
8
12%
$ 475,000
$475,000
$ 29,000
$ 34,000
Right-of-use
Asset/Lease
Liability
60,000
331,100
73,951
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