Exercise 15-24 (Algo) Calculation of annual lease payments; residual value [LO15-2, 15-6] 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) 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 4 10% 70,000 $ 70,000 Lease Payments 0 $ 2 7 11% $ 370,000 $ 370,000 Residual Value PV of Lease Guarantee Payments Situation $ 70,000 0 3 70,000 $ $ $ 5 9% $ 95,000 $ 65,000 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. $ 27,000 $ 27,000 PV of Residual Value Guarantee 8 12% 0 $ 0 0 $ 485,000 $ 485,000 $ 39,000 $ 44,000 Right-of-use Asset/Lease Liability 70,000
Exercise 15-24 (Algo) Calculation of annual lease payments; residual value [LO15-2, 15-6] 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) 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 4 10% 70,000 $ 70,000 Lease Payments 0 $ 2 7 11% $ 370,000 $ 370,000 Residual Value PV of Lease Guarantee Payments Situation $ 70,000 0 3 70,000 $ $ $ 5 9% $ 95,000 $ 65,000 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. $ 27,000 $ 27,000 PV of Residual Value Guarantee 8 12% 0 $ 0 0 $ 485,000 $ 485,000 $ 39,000 $ 44,000 Right-of-use Asset/Lease Liability 70,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![Exercise 15-24 (Algo) Calculation of annual lease payments; residual value [LO15-2, 15-6]
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)
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
$ 70,000
$ 70,000
4
10%
Residual Value
Guarantee
0
0
$
2
7
11%
$ 370,000
$ 370,000
PV of Lease
Payments
$ 70,000
0
Situation
70,000 $
$
GA
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 amount.
$
PV of Residual
Value Guarantee
5
$ 95,000
$ 65,000
9%
$ 27,000
$ 27,000
0
0
0
8
12%
$
$ 485,000
$ 485,000
$ 39,000
$ 44,000
Right-of-use
Asset/Lease
Liability
70,000](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F0b9e9977-435c-42e3-9a3c-7e66fdf2f1f4%2F2af0bd63-8649-46a3-a124-cd31133543b3%2F8nv0suh_processed.gif&w=3840&q=75)
Transcribed Image Text:Exercise 15-24 (Algo) Calculation of annual lease payments; residual value [LO15-2, 15-6]
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)
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
$ 70,000
$ 70,000
4
10%
Residual Value
Guarantee
0
0
$
2
7
11%
$ 370,000
$ 370,000
PV of Lease
Payments
$ 70,000
0
Situation
70,000 $
$
GA
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 amount.
$
PV of Residual
Value Guarantee
5
$ 95,000
$ 65,000
9%
$ 27,000
$ 27,000
0
0
0
8
12%
$
$ 485,000
$ 485,000
$ 39,000
$ 44,000
Right-of-use
Asset/Lease
Liability
70,000
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