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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 4 10% $ 50,000 $ 50,000 0 0 2 Situation 7 11% $ 350,000 $ 350,000 $ 50,000 0 3 5 9% $ 75,000 $ 45,000 $ 7,000 $7,000 4 8 12% $ 465,000 $ 465,000 $ 45,000 '$ 50,000 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) 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 4 10% $ 50,000 $ 50,000 0 0 2 Situation 7 11% $ 350,000 $ 350,000 $ 50,000 0 3 5 9% $ 75,000 $ 45,000 $ 7,000 $7,000 4 8 12% $ 465,000 $ 465,000 $ 45,000 '$ 50,000 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
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 $ $ $ AL 1 4 10% $ 50,000 $50,000 Residual Value Guarantee $ 14,340 0 $ 62,310 $O $ 16,617 $ 0 $ 5,000 INTERTY $ 0 0 2 PV of Lease Payments TEST Situation 7 11% $ 350,000 $ 350,000 $ 50,000 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 50,000 $ 325,917 $ 70,450 $ 5 9% $75,000 $ 45,000 $ 7,000 $ 7,000 PV of Residual Value Guarantee 4 0 $ 0 $ 0 $ 8 12% $ 465,000 $ 465,000 $ 45,000 '$ 50,000 Right-of-use Asset/Lease Liability 50,001 325,915 70,451
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 $ $ $ AL 1 4 10% $ 50,000 $50,000 Residual Value Guarantee $ 14,340 0 $ 62,310 $O $ 16,617 $ 0 $ 5,000 INTERTY $ 0 0 2 PV of Lease Payments TEST Situation 7 11% $ 350,000 $ 350,000 $ 50,000 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 50,000 $ 325,917 $ 70,450 $ 5 9% $75,000 $ 45,000 $ 7,000 $ 7,000 PV of Residual Value Guarantee 4 0 $ 0 $ 0 $ 8 12% $ 465,000 $ 465,000 $ 45,000 '$ 50,000 Right-of-use Asset/Lease Liability 50,001 325,915 70,451
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