Each of the four independent situations below describes a sales-type lease in which annual lease payments of $19,000 are payable at the beginning of each year. Each is a finance lease for the lessee. Lease term (years) Asset's useful life (years) Lessor's implicit rate (known by lessee) Residual value: Guaranteed by lessee Unguaranteed Purchase option: After (years) Exercise price Reasonably certain? 1 4 4 12% $0 $0 none 2 Situation 4 5 12% $7,600 $0 3 $ 8,800 no 3 4 5 12% $ 3,800 $3,800 4 $ 2,800 no 4 4 7 12% $0 $7,600 3 $4,800 yes
Each of the four independent situations below describes a sales-type lease in which annual lease payments of $19,000 are payable at the beginning of each year. Each is a finance lease for the lessee. Lease term (years) Asset's useful life (years) Lessor's implicit rate (known by lessee) Residual value: Guaranteed by lessee Unguaranteed Purchase option: After (years) Exercise price Reasonably certain? 1 4 4 12% $0 $0 none 2 Situation 4 5 12% $7,600 $0 3 $ 8,800 no 3 4 5 12% $ 3,800 $3,800 4 $ 2,800 no 4 4 7 12% $0 $7,600 3 $4,800 yes
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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1
Transcribed Image Text:Each of the four independent situations below describes a sales-type lease in which annual lease payments of $19,000 are payable at
the beginning of each year. Each is a finance lease for the lessee.
Lease term (years)
Asset's useful life (years)
Lessor's implicit rate (known by lessee)
Residual value:
Guaranteed by lessee
Unguaranteed
Purchase option:
A. The lessor's
1. Total lease payments
2 Gross investment in the lease
1
$ 76,000
76,000
2
Situation
1
76,000
83,600
4
4
12%
$0
$0
Answer is complete but not entirely correct.
3
none
2
133,000 X
83,600
Situation
DE 3
$ 7,600
$0
4
5
12%
After (years)
Exercise price
Reasonably certain?
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)
Determine the following amounts at the beginning of the lease:
Note: Round your final answers to nearest whole dollar.
3
$ 8,800
no
4
95,000 X
98,800 X
4
5
12%
$ 3,800
$ 3,800
4
$ 2,800
no
4
4
7
12%
$0
$ 7,600
3
$ 4,800
yes
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