Each of the independent situations below describes a finance lease in which annual lease payments are payable at the beginning ofeach year The lessee is aware of the lessor's implicit interest rate, (FV of $1, PV of $1, EVA of $t, PVA of $1, FVAD of $1 and PVAD of $1(Use appropriate factor(s) from the tables provided.)SituationLease temLessor's desired rate of returnLessee's incremental borrowing r ateAmount of lease10yrs20yrs10%8%$530, 00010%$730 000For convenience, here are some table values:PV, ordinary annuityPeriods; int. rate10 perieds, BY10 periods, 19%28 periods, 8%20 perieds, 10%annuity6.71016.14469.81818.5136Required:For each situation determine the amount recorded as:and final answer to the nearest whole dollar.bitiM he lessee at the beginning of the lease.(Round your intermeciekeAmount of LiabitityStuation 1Stration 2

Finance Lease is the type of lease that substantially transfers all the risks and rewards incidental…

Each of the indépendent 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 interest rate, (FV of $1, PV of $1, EVA of $1. PVA of $1, FVAD of $1 and PVAD of $1 (Use appropriate factor(s) from the tables provided.) ESituation 10yrs 8% Lease term 20yrs Lessor 's desired rate of return Lessee's incremental borrowing tate Amount of lease 10% $730, 000 $530, 000 For convenience, here are some table values: Periods; int, rate 10 perieds, BX 10 periods. 19% 20 periods, 8% 20 periods, 10% PV, ordinary aanuiey 6.7101 6.1446 9,8181 8.5136 annuity Required: For each situation determine the amount recorded as aliebitiy and final answer to the nearest whole dollar thể lessee at the beginning of the tease.(Round your intermeciele

Each of the indépendent 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 interest rate, (FV of $1, PV of $1, EVA of $1. PVA of $1, FVAD of $1 and PVAD of $1 (Use appropriate factor(s) from the tables provided.) ESituation 10yrs 8% Lease term 20yrs Lessor 's desired rate of return Lessee's incremental borrowing tate Amount of lease 10% $730, 000 $530, 000 For convenience, here are some table values: Periods; int, rate 10 perieds, BX 10 periods. 19% 20 periods, 8% 20 periods, 10% PV, ordinary aanuiey 6.7101 6.1446 9,8181 8.5136 annuity Required: For each situation determine the amount recorded as aliebitiy and final answer to the nearest whole dollar thể lessee at the beginning of the tease.(Round your intermeciele

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) Situation 1 2 3 4 Lease term (years) Lessor's rate of return. 5 10% 8 11% 6 9 9% 12% Fair value of lease asset $ 67,000 $ 367,000 $ 92,000 Lessor's cost of lease asset $ 67,000 $ 367,000 $ 62,000 $ 482,000 $ 482,000 Residual value: Estimated fair value Guaranteed fair value 0 $ 67,000 $ 24,000 $ 36,000 0 0 $ 24,000 $ 41,000 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. Lease Payments Residual Value PV of Lease Guarantee Payments PV of…
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Each of the four independent situations below describes a sales-type lease in which annual lease payments of $17,500 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 Determine the following amounts at the beginning of the lease: Note: Round your final answers to nearest whole dollar. A. The lessor's: 1. Total lease payments 2. Gross investment in the lease 3. Net investment in the lease B. The lessee's: 4. Total lease payments 5. Right-of-use asset 6. Lease liability $ 1 70,000 2 Situation 1 70,000 4 4 8% $0 $0 none 3 2 70,000 Situation 4 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) 8% $ 7,000 $0 4 $ 8,500 no 4 5 8% $3,500 $ 3,500 $ 2,500 no 4 4 7 8% $0 $ 7,000 3 $ 4,500 yes
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Classifying Leases The following separate scenarios relate to a 5-year lease, pertaining to equipment with a fair value of $50,000. Assume in all scenarios that payments are made at the beginning of the period. 1. Lease payments include a fixed payment of $10,000 per year. 2. Lease payments include a fixed payment of $10,000 per year, plus $500 for insurance and $600 for a maintenance contract. 3. Lease payments will be $10,000 in the first year and will increase by 3% (calculated on the previous year's payment) for each of the following 4 years. 4. Lease payments will be $10,000 in the first year and will increase each of the following years by the increase in the CPI from the preceding year. The current CPI is 120 and is expected to increase to 122 at the end of the next year. 5. Lease payments will be $10,000 in the first year and will increase each of the following years by (a) the increase in the CPI from the preceding year, or (b) 3%, whichever is greater. The current CPI is 120…
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) Situation 1 2 3 4 Lease term (years) Lessor's rate of return 4 10% 7 11% 5 8 9% 12% Fair value of lease asset $ 56,000 $ 356,000 $ 81,000 $ 471,000 Lessor's cost of lease asset $ 56,000 $ 356,000 $ 51,000 $ 471,000 Residual value: Estimated fair value 0 $ 56,000 Guaranteed fair value 0 0 $ 13,000 $13,000 $ 51,000 $ 56,000 Required: a. & b. Determine the amount of the annual lease payments as calculated by the lessor and the amount the essee 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. Answer is complete but not entirely correct. Lease Payments Residual…
Each of the four independent situations below describes a finance lease in which annual lease payments are pay- able at the beginning of each year. The lessee is aware of the lessor's implicit rate of return. Situation 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 1 4 10% $50,000 $50,000 0 2 7 11% $350,000 $350,000 $ 50,000 0 3 5 9% $75,000 $45,000 $7,000 $7,000 Required: For each situation, determine: a. The amount of the annual lease payments as calculated by the lessor. b. The amount the lessee would record as a right-of-use asset and a lease liability. 4 8 12% $465,000 $465,000 10 $ 45,000 $ 50,000
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