Each of the four independent situations below describes a sales-type lease in which annual lease payments of $130,000 are payable at the beginning of each year. Each is a finance lease for the lessee. 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 1 2 3 4 Lease term (years) 7 Lessor's and lessee's interest rate 8% 7 10% 8 9% 8 11% Residual value: Estimated fair value $ 0 $ 0 $ 56,000 $ 0 $ 8,600 $ 56,000 $ 8,600 $ 66,000 Guaranteed by lessee Determine the following amounts at the beginning of the lease. Note: Round your intermediate and final answers to the nearest whole dollar amount. A. The lessor's: 1. Total lease payments 2. Gross investment in the lease 3. Net investment in the lease B. The lessee's: Situation 1 2 3 4 $ 910,000 $ 910,000 $ 1,040,000 910,000 966,000 $1,040,000 1,048,600 1,106,000 730,974 724,921 788,600 771,225 4. Total lease payments 910,000 910,000 1,040,000 5. Right-of-use asset 730,974 6. Lease liability 730,974
Each of the four independent situations below describes a sales-type lease in which annual lease payments of $130,000 are payable at the beginning of each year. Each is a finance lease for the lessee. 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 1 2 3 4 Lease term (years) 7 Lessor's and lessee's interest rate 8% 7 10% 8 9% 8 11% Residual value: Estimated fair value $ 0 $ 0 $ 56,000 $ 0 $ 8,600 $ 56,000 $ 8,600 $ 66,000 Guaranteed by lessee Determine the following amounts at the beginning of the lease. Note: Round your intermediate and final answers to the nearest whole dollar amount. A. The lessor's: 1. Total lease payments 2. Gross investment in the lease 3. Net investment in the lease B. The lessee's: Situation 1 2 3 4 $ 910,000 $ 910,000 $ 1,040,000 910,000 966,000 $1,040,000 1,048,600 1,106,000 730,974 724,921 788,600 771,225 4. Total lease payments 910,000 910,000 1,040,000 5. Right-of-use asset 730,974 6. Lease liability 730,974
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Each of the four independent situations below describes a sales-type lease in which annual lease payments of $130,000 are
payable at the beginning of each year. Each is a finance lease for the lessee.
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
1
2
3
4
Lease term (years)
7
Lessor's and lessee's interest rate
8%
7
10%
8
9%
8
11%
Residual value:
Estimated fair value
$ 0
$ 0
$ 56,000
$ 0
$ 8,600
$ 56,000
$ 8,600
$ 66,000
Guaranteed by lessee
Determine the following amounts at the beginning of the lease.
Note: Round your intermediate and final answers to the nearest whole dollar amount.
A. The lessor's:
1. Total lease payments
2. Gross investment in the lease
3. Net investment in the lease
B. The lessee's:
Situation
1
2
3
4
$ 910,000 $
910,000 $ 1,040,000
910,000
966,000
$1,040,000
1,048,600 1,106,000
730,974
724,921
788,600
771,225
4. Total lease payments
910,000
910,000
1,040,000
5. Right-of-use asset
730,974
6. Lease liability
730,974
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