Each of the four independent situations below describes a sales-type lease in which annual lease payments of $16,000 are payable at the beginning of each year, Each is a finance lease for the lessee. (EV of $1. PV of $1. EVA of $1. PVA of $1. EVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) 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? 4 4 11% 0 0 none n/a n/a Situation 4 5 11% $6,400 0 $8,200 no 4 11% $3,200 $3,200 $2,200 no 4 4 7 11% 0 $6,400 $4,200 yes

Each of the four independent situations below describes a sales-type lease in which annual lease payments of $16,000 are payable at the beginning of each year, Each is a finance lease for the lessee. (EV of $1. PV of $1. EVA of $1. PVA of $1. EVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) 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? 4 4 11% 0 0 none n/a n/a Situation 4 5 11% $6,400 0 $8,200 no 4 11% $3,200 $3,200 $2,200 no 4 4 7 11% 0 $6,400 $4,200 yes

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 three 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 (known by lessee) Lessee's incremental borrowing rate Fair value of lease asset Situation 11 Situation 2 Situation 3 Lease Payments 10 11% 12% Right-of-use Asset/Lease Payable $780,000 Situation 20 9% 10% $1,150,000 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. 6 12% 11% $365,000
Each of the four independent situations below describes a sales-type lease in which annual lease payments a at the beginning of each year. Each is a finance lease for the lessee. (FV of $1, PV of $1, FVA of $1, PVA of $1, $1) (Use appropriate factor(s) from the tables provided.) Situation 1 2 3 Lease term (years) 7 7 8 Lessor's and lessee's interest rate Residual value: 8 128 98 11% 10% Estimated fair value 0 $50,000 $8,000 $50,000 Guaranteed by lessee 0 0 $8,000 $60,000 Determine the following amounts at the beginning of the lease. (Round your intermediate and final answers dollar amount.) Situation 2 A The lessor's: 1. Lease payments 2. Gross investment in the lease 3. Net investment in the lease The lessee's: 4. Lease payments 5. Right-of-use asset 6. Lease payable B
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Three independent situations are given. Each describes a finance lease in which annual lease payments are payable at the beginning of each year. Each lease agreement contains an option that permits the lessee to acquire the leased asset at an option price that is sufficiently lower than the expected fair value that the exercise of the option appears 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) Lease term (years) Lessor's rate of return Fair value of leased asset. Lessor's cost of leased asset. Purchase option: Exercise price Exercisable at end of year: Reasonably certain? Situation 1 Situation 2 Situation 3 1 Annual lease payments 4 10% $92,000 $ 66,000 $ 26,000 4 yes Situation 2 4 11% $ 436,000 $ 436,000 $ 66,000 4 no 3 3 9% $ 201,000 $ 161,000 yes $ 38,000 2 Determine the annual lease payments for each situation: Note: Round your intermediate and final answers to the nearest whole dollar…