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 14,340 $ 62,310 $ 16,590 x $ 79,947 $ 1 4 10% $ 50,000 $ 50,000 0 0 0 5,000 0 0 $ $ $ $ 2 Situation $ 350,000 $ 350,000 $50,000 0 PV of Lease Payments 50,000 325,917 70,336 444,806 7 11% 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. $ $ $ $ X Answer is complete but not entirely correct. Residual Value Guarantee PV of Residual Value Guarantee $ 75,000 $ 45,000 $7,000 $ 7,000 5 9% 0 0✓ 3000 0 2,019 $ 4 $ $ 8 12% $ 465,000 $ 465,000 $ 45,000 $ 50,000 Right-of-use Asset/Lease Liability 50,000 325,917 ✔ 70,336 x 444,806 X
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 14,340 $ 62,310 $ 16,590 x $ 79,947 $ 1 4 10% $ 50,000 $ 50,000 0 0 0 5,000 0 0 $ $ $ $ 2 Situation $ 350,000 $ 350,000 $50,000 0 PV of Lease Payments 50,000 325,917 70,336 444,806 7 11% 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. $ $ $ $ X Answer is complete but not entirely correct. Residual Value Guarantee PV of Residual Value Guarantee $ 75,000 $ 45,000 $7,000 $ 7,000 5 9% 0 0✓ 3000 0 2,019 $ 4 $ $ 8 12% $ 465,000 $ 465,000 $ 45,000 $ 50,000 Right-of-use Asset/Lease Liability 50,000 325,917 ✔ 70,336 x 444,806 X
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
14,340
62,310 $
16,590 × $
79,947
1
4
10%
$ 50,000
$50,000
0
0
0
$
$
$
5,000 $
0
2
$ 350,000
$ 350,000
Situation
$ 50,000
0
PV of Lease
Payments
7
11%
50,000
325,917
70,336 × $
444,806
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
X Answer is complete but not entirely correct.
PV of Residual
Residual
Value
Guarantee
Value
Guarantee
5
9%
$ 75,000
$ 45,000
$ 7,000
$7,0
0
0
0
2,019
$
$
4
$
8
12%
$ 465,000
$ 465,000
$ 45,000
$ 50,000
Right-of-use
Asset/Lease
Liability
50,000
325,917
70,336 X
444,806 X
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