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 Situation 2 20 333 9% 10% $1,010,000 630,000 1,010,000 215,000 10 11% 12% $630,000 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. 5 12% 11% $215,000
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 Situation 2 20 333 9% 10% $1,010,000 630,000 1,010,000 215,000 10 11% 12% $630,000 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. 5 12% 11% $215,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text: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
630,000
1,010,000
215,000
10
11%
12%
$630,000
Situation.
2
20
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.
$1,010,000
3
5
12%
11%
Check my work
$215,000
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