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. (FV of $1, PV of $1, FVA of $1, PVA of $1, EVAD of $1 and PVAD of $1) (Use approprlate factor(s) from the tables provlded.) Situation 2 3 Lease term (years) Lessor's rate of return (known by lessee) Lessee's incremental borrowing rate Fair value of lease asset 10 20 5 11% 9% 12% 12% 10% 11% $720,000 $1,100,000 $305,000 Requlred: 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 llability, for each of the above situations. (Round your answers to the nearest whole dollar.) Right-of-use Asset/Lease Payable Lease Payments Situation 1 Situation 2 Situation 3

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. (FV of $1, PV of $1, FVA of $1, PVA of $1, EVAD of $1 and PVAD of $1) (Use approprlate factor(s) from the tables provlded.) Situation 2 3 Lease term (years) Lessor's rate of return (known by lessee) Lessee's incremental borrowing rate Fair value of lease asset 10 20 5 11% 9% 12% 12% 10% 11% $720,000 $1,100,000 $305,000 Requlred: 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 llability, for each of the above situations. (Round your answers to the nearest whole dollar.) Right-of-use Asset/Lease Payable Lease Payments Situation 1 Situation 2 Situation 3

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 4 10% 7 11% 5 8 9% 12% Fair value of lease asset $ 64,000 $ 364,000 $ 89,000 Lessor's cost of lease asset $ 64,000 $ 364,000 $ 59,000 $ 479,000 $479,000 0 $ 64,000 $ 21,000 $ 33,000 0 0 $ 21,000 $ 38,000 Residual value: Estimated fair value Guaranteed fair value 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. Right-of-use Lease Payments Residual Value Guarantee PV of Lease…
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For each of the three independent situations below determine the amount of the annual lease payments. 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. (FV of $1, PV of $1. FVA of $1. PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) 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% $82,000 $61,000 Situation 2 4 11% $431,000 $431,000 $ 21,000 $ 61,000 4 4 yes no 3 3 9% $196,000 $156,000 Determine the annual lease payments for each situation: (Round your intermediate and final…
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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 1 Situation 2 Situation 3 Lease Payments Right-of-use Asset/Lease Payable $ $ $ 1 650,000 1,030,000 235,000 11 11% 12% $650,000 Situation 2 21 9% 10% 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. $1,030,000 3 5 12% 11% $235,000
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. (FV of $1. PV of $1. FVA of $1, PVA of $1. FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) 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 Residual Value Guarantee $ 1 5,000 0 0 2 6 10% $58,000 $358,000 $83,000 $58,000 $358,000 $53,000 $ PV of Lease Payments Situation 9 11% $ 58,000 0 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. (Round your answers to the nearest whole dollar amount.) 58,000 3 7 9% 4 PV of…
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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 Fair value of lease asset 4 10% 7 11% 5 9% 8 12% $ 64,000 $ 364,000 $ 89,000 Lessor's cost of lease asset $ 64,000 $ 364,000 $ 59,000 $ 479,000 $ 479,000 Residual value: Estimated fair value 0 $ 64,000 $ 21,000 $ 33,000 Guaranteed fair value 0 0 $ 21,000 $ 38,000 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. Right-of-use Lease Payments Residual Value Guarantee PV of Lease…
ompany signs an agreement on January 1, 2020, to lease equipment to Plote Company. The following information relates to this agreement. 1. 2 3. 4. 5. 6. The term of the non-cancelable lease is 3 years with no renewal option. The equipment has an estimated economic life of 5 years. The fair value of the asset at January 1, 2020, is $80,000. The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $7,000, none of which is guaranteed. The agreement requires equal annual rental payments of $25,563 to the lessor, beginning on January 1, 2020. The lessee's incremental borrowing rate is 5%. The lessor's implicit rate is 4% and is unknown to the lessee. Plote uses the straight-line depreciation method for all equipment. Click here to view factor tables. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.)
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