Exercise 15-1 (Static) Lease classification [LO15-1] Lease term (years) Asset's useful life (years) Asset's fair value Purchase option that is reasonably certain to be exercised? Annual lease payments. Lessor's implicit rate (known by lessee) Lessee's incremental borrowing rate Situation 1. 2 3 4 $44,000 No Beginning of year 5% 5x Lease Classification Situation 4 $45,000 Yes End of year 6X 5% Required: Each of the four independent situations above describes a lease requiring annual lease payments of $10,000 For each situation, determine the appropriate lease classification by the lessee. Note: Use tables, Excel, or a financial calculator. (EV of $1. PV of $1. EVA of $1. PVA of $1. EVAD of $1 and PVAD of $1) 3 4 $41,000 No Beginning of year 5% 5% $38,000 No End of year 6%
Exercise 15-1 (Static) Lease classification [LO15-1] Lease term (years) Asset's useful life (years) Asset's fair value Purchase option that is reasonably certain to be exercised? Annual lease payments. Lessor's implicit rate (known by lessee) Lessee's incremental borrowing rate Situation 1. 2 3 4 $44,000 No Beginning of year 5% 5x Lease Classification Situation 4 $45,000 Yes End of year 6X 5% Required: Each of the four independent situations above describes a lease requiring annual lease payments of $10,000 For each situation, determine the appropriate lease classification by the lessee. Note: Use tables, Excel, or a financial calculator. (EV of $1. PV of $1. EVA of $1. PVA of $1. EVAD of $1 and PVAD of $1) 3 4 $41,000 No Beginning of year 5% 5% $38,000 No End of year 6%
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![Exercise 15-1 (Static) Lease classification [LO15-1]
Lease term (years)
Asset's useful life (years)
Asset's fair value
Purchase option that is reasonably certain to be
exercised?
Annual lease payments.
Lessor's implicit rate (known by lessee)
Lessee's incremental borrowing rate
Situation
1.
2
3
4
$44,000
Mo
Beginning of year
5%
5x
Lease Classification
4
Situation
$45,000
Yes
End of year
60%
5%
3
4
6
$41,000
Required:
Each of the four independent situations above describes a lease requiring annual lease payments of $10,000 For each situation,
determine the appropriate lease classification by the lessee.
Note: Use tables, Excel, or a financial calculator. (EV of $1. PV of $1. EVA of $1. PVA of $1. EVAD of $1 and PVAD of $1)
No
Beginning of year
5%
5%
$38,000
No
End of year
6%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fcc67301f-3402-444a-ad0a-927c02283bb2%2F5d6b74fb-0756-42fa-8b27-ba64caf9383f%2F8pc1f9n_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Exercise 15-1 (Static) Lease classification [LO15-1]
Lease term (years)
Asset's useful life (years)
Asset's fair value
Purchase option that is reasonably certain to be
exercised?
Annual lease payments.
Lessor's implicit rate (known by lessee)
Lessee's incremental borrowing rate
Situation
1.
2
3
4
$44,000
Mo
Beginning of year
5%
5x
Lease Classification
4
Situation
$45,000
Yes
End of year
60%
5%
3
4
6
$41,000
Required:
Each of the four independent situations above describes a lease requiring annual lease payments of $10,000 For each situation,
determine the appropriate lease classification by the lessee.
Note: Use tables, Excel, or a financial calculator. (EV of $1. PV of $1. EVA of $1. PVA of $1. EVAD of $1 and PVAD of $1)
No
Beginning of year
5%
5%
$38,000
No
End of year
6%
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